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Jack In The Box (JACK) Down 2.5% Since Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Jack In The Box Inc. (JACK - Free Report) . Shares have lost about 2.5% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is JACK due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Jack in the Box Q1 Earnings & Revenues Top
Jack in the Box Inc. reported better-than-expected results in the first quarter of fiscal 2018.
Adjusted earnings of $1.23 per share surpassed the Zacks Consensus Estimate of $1.06 by 16%. The bottom line also increased nearly 15% year over year on margin improvement driven by refranchising.
Revenues of $294.5 million exceeded the Zacks Consensus Estimate of $285.9 million by 3%. However, the top line fell 16.6% on a year-over-year basis owing to lower comps.
Notably, the company’s refranchising strategies are effectively improving margins despite the pressure from higher labor and maintenance costs and commodity inflation.
Jack in the Box Comps Discussion
Comps at Jack in the Box company stores increased 0.2%, comparing unfavorably with the prior-year quarter’s rise of 0.6%, but better than last quarter’s decline of 2%. The comps growth was driven by average check growth of 2.6%, partially offset by a 2.4% decline in transactions.
Same-store sales at franchised stores declined 0.3%, comparing unfavorably with a gain of 3.9% in the year-ago quarter, but improved from a loss of 0.7% in the previous quarter. System-wide same-store sales fell 0.2% against a rise of 3.1% in the comparable period last year and the prior-quarter’s comps decline of 1%.
Qdoba Scenario
In the fiscal first quarter, the company signed an agreement to sell Qdoba to Apollo Global Management, LLC. The transaction, however, is expected to close by April 2018. Therefore, the company did not allocate any general and administrative shared services expenses to discontinued operations that incorporate Qdoba’s operating results.
Qdoba generated net loss of $0.6 million in the quarter against net earnings of $1.4 million in the prior-year quarter.
Operating Highlights
The company’s consolidated restaurant operating margin was 22.2%, up 60 basis points (bps) year over year.
Restaurant-level EBITDA increased 20 bps from the year-ago quarter to 26%. The increase was driven by the benefit of refranchising, but was partially offset by an increase in food and packaging costs resulting from commodity inflation, higher repairs and maintenance costs, wage inflation and higher costs for workers' compensation insurance.
Franchise operating margin was 52.6%, down 30 bps year over year. Franchise EBITDA was 60.9% in the quarter, reflecting a year-over-year decline of 10 bps. The downside was due to reduced royalties from some restaurants sold to franchisees in 2017, and a decrease in franchise-operated restaurant comps in the current quarter. This was, however, partially offset by an uptick in franchise fees of $0.8 million from the refranchising of 22 restaurants in the first quarter.
Balance Sheet
As of Jan 21, 2018, Cash totaled $3.8 million compared with $4.5 million as of Oct 1, 2017 (end of fourth-quarter and fiscal 2017). Inventories in the first quarter amounted to $3.3 million, down from $3.4 million at the end of fiscal 2017.
Long-term debt was $1.03 billion as of Jan 21, 2018 compared with $1.07 billion at the end of fiscal 2017. Cash flows from operating activities declined to $53.7 million in the first quarter, compared with $69.8 million as of Oct 1, 2017.
The company did not repurchase any shares of its common stock in the first quarter of 2018. However, its board of directors announced a cash dividend of 40 cents per share on the company's common stock which is payable on Mar 16, 2018, to shareholders of record at the close of business on Mar 5, 2018.
Second-quarter Fiscal 2018 Guidance
Comps are expected in the range of -1% to 1% at Jack in the Box system restaurants, compared with a 0.8% decline in the year-ago quarter.
Fiscal 2018 Outlook
Comps at Jack in the Box system restaurants are expected to increase 1% to 2%. Restaurant operating margin is anticipated in the range of 22-23%, while Restaurant-Level EBITDA is projected within 26-27%.
Adjusted EBITDA of approximately $260-$270 million is expected in the fiscal year. Capital expenditures are estimated roughly in the range of $30-$35 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been eight revisions lower for the current quarter. In the past month, the consensus estimate has shifted by 7.5% due to these changes.
At this time, JACK has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, JACK has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Jack In The Box (JACK) Down 2.5% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Jack In The Box Inc. (JACK - Free Report) . Shares have lost about 2.5% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is JACK due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Jack in the Box Q1 Earnings & Revenues Top
Jack in the Box Inc. reported better-than-expected results in the first quarter of fiscal 2018.
Adjusted earnings of $1.23 per share surpassed the Zacks Consensus Estimate of $1.06 by 16%. The bottom line also increased nearly 15% year over year on margin improvement driven by refranchising.
Revenues of $294.5 million exceeded the Zacks Consensus Estimate of $285.9 million by 3%. However, the top line fell 16.6% on a year-over-year basis owing to lower comps.
Notably, the company’s refranchising strategies are effectively improving margins despite the pressure from higher labor and maintenance costs and commodity inflation.
Jack in the Box Comps Discussion
Comps at Jack in the Box company stores increased 0.2%, comparing unfavorably with the prior-year quarter’s rise of 0.6%, but better than last quarter’s decline of 2%. The comps growth was driven by average check growth of 2.6%, partially offset by a 2.4% decline in transactions.
Same-store sales at franchised stores declined 0.3%, comparing unfavorably with a gain of 3.9% in the year-ago quarter, but improved from a loss of 0.7% in the previous quarter. System-wide same-store sales fell 0.2% against a rise of 3.1% in the comparable period last year and the prior-quarter’s comps decline of 1%.
Qdoba Scenario
In the fiscal first quarter, the company signed an agreement to sell Qdoba to Apollo Global Management, LLC. The transaction, however, is expected to close by April 2018. Therefore, the company did not allocate any general and administrative shared services expenses to discontinued operations that incorporate Qdoba’s operating results.
Qdoba generated net loss of $0.6 million in the quarter against net earnings of $1.4 million in the prior-year quarter.
Operating Highlights
The company’s consolidated restaurant operating margin was 22.2%, up 60 basis points (bps) year over year.
Restaurant-level EBITDA increased 20 bps from the year-ago quarter to 26%. The increase was driven by the benefit of refranchising, but was partially offset by an increase in food and packaging costs resulting from commodity inflation, higher repairs and maintenance costs, wage inflation and higher costs for workers' compensation insurance.
Franchise operating margin was 52.6%, down 30 bps year over year. Franchise EBITDA was 60.9% in the quarter, reflecting a year-over-year decline of 10 bps. The downside was due to reduced royalties from some restaurants sold to franchisees in 2017, and a decrease in franchise-operated restaurant comps in the current quarter. This was, however, partially offset by an uptick in franchise fees of $0.8 million from the refranchising of 22 restaurants in the first quarter.
Balance Sheet
As of Jan 21, 2018, Cash totaled $3.8 million compared with $4.5 million as of Oct 1, 2017 (end of fourth-quarter and fiscal 2017). Inventories in the first quarter amounted to $3.3 million, down from $3.4 million at the end of fiscal 2017.
Long-term debt was $1.03 billion as of Jan 21, 2018 compared with $1.07 billion at the end of fiscal 2017. Cash flows from operating activities declined to $53.7 million in the first quarter, compared with $69.8 million as of Oct 1, 2017.
The company did not repurchase any shares of its common stock in the first quarter of 2018. However, its board of directors announced a cash dividend of 40 cents per share on the company's common stock which is payable on Mar 16, 2018, to shareholders of record at the close of business on Mar 5, 2018.
Second-quarter Fiscal 2018 Guidance
Comps are expected in the range of -1% to 1% at Jack in the Box system restaurants, compared with a 0.8% decline in the year-ago quarter.
Fiscal 2018 Outlook
Comps at Jack in the Box system restaurants are expected to increase 1% to 2%. Restaurant operating margin is anticipated in the range of 22-23%, while Restaurant-Level EBITDA is projected within 26-27%.
Adjusted EBITDA of approximately $260-$270 million is expected in the fiscal year. Capital expenditures are estimated roughly in the range of $30-$35 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been eight revisions lower for the current quarter. In the past month, the consensus estimate has shifted by 7.5% due to these changes.
Jack In The Box Inc. Price and Consensus
Jack In The Box Inc. Price and Consensus | Jack In The Box Inc. Quote
VGM Scores
At this time, JACK has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, JACK has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.