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Jack in the Box (JACK) Q3 Earnings to Suffer High Costs

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Jack in the Box Inc. (JACK - Free Report) is scheduled to report third-quarter fiscal 2018 results on Aug 8, after the closing bell.

Despite undertaking various sales-building initiatives like regular menu innovation, increased focus on catering, delivery and marketing, we expect the company’s overall top line to suffer in the fiscal third quarter due to an ongoing decline in traffic and demand. Meanwhile, refranchising benefits are also expected to be offset by commodity inflation as well as higher repair and maintenance costs.

Jack in the Box has missed earnings and revenue estimates in three of the trailing four quarters. In the last-reported quarter, the company missed earnings estimates by 7% whereas revenues lagged the consensus mark by 1.4%. Moreover, the company recorded an average negative earnings surprise of 3.7% in the trailing four quarters. Consequently, Jack in the Box’s shares have lost 9.1% in the past year against the industry’s rally of 4.2%.


Let’s delve deeper to find out how the company’s top and bottom lines will shape up this earnings season.

Top and Bottom Line Likely to Suffer

Lower traffic and soft demand arelikely to impact sales of Jack in the Box in the fiscal third quarter. In the fiscal second quarter, total sales decreased 21.1% year over year and the declining trend is likely to have continued in the to-be-reported quarter as well. Subsequently, the Zacks Consensus Estimate for the fiscal third quarter’s sales is pegged at $184.5 million, reflecting a 48.4% year-over-year decline.It expects fiscal third-quarter comps in the range of flat to up 1% at Jack in the Box system restaurants compared with a 0.2% decline in the year-ago quarter.

Notably, the consensus estimate pegs earnings at 88 cents in the fiscal third quarter, suggesting an 11.1% decline from the year-ago quarter. In addition to the dented profit margins from sales deleverage, Jack in the Box is bearing the brunt of high costs. In fact, high capital expenditure and expenses related to restaurant openings areconcerningfor the company. Moreover, increase in food and packaging costs, impact of wage inflation and rising commodity prices might impact the company’s margin in the to-be-reported quarter.

What the Zacks Model Unveils

Our proven model shows that Jack in the Box is likely to beat earnings estimates this quarter. This is because the stock has the right combination of two ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.  
 
Jack in the Box has an Earnings ESP of +0.88% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Jack In The Box Inc. Price and EPS Surprise

 

Other Stocks to Consider

Here are some other companies in the restaurant space, which, per our model, have the right combination of elements to post an earnings beat in the to-be-reported quarter.

Brinker (EAT - Free Report) , with a Zacks Rank #3, has an Earnings ESP of +2.03%. The company is expected to report quarterly results on Aug 9.

Ruth’s Hospitality (RUTH - Free Report) carries a Zacks Rank #3 and hasan Earnings ESP of +7.86%. The company is scheduled to report quarterly numbers on Aug 10.

Dave & Buster’s (PLAY - Free Report) has an Earnings ESP of +10.72% and it currently carries a Zacks Rank #2. The company is anticipated to report quarterly results on Sep 4.

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