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Jack in the Box (JACK) Stock Up on Q3 Earnings & Sales Beat

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Jack in the Box Inc. (JACK - Free Report) reported better-than-expected results in third-quarter fiscal 2018 after missing the Zacks Consensus Estimate in the previous quarter. Following the quarterly results, shares of the company jumped 7.6% in after-hours trading. However, the stock has lost 10.2% in a year against the industry’s 4.4% growth.

Adjusted earnings from continuing operations came in at $1.00 per share, which surpassed the consensus mark of 88 cents. The bottom-line figure also increased 26.6% on a year-over-year basis. Total sales of $188 million exceeded the consensus mark of $184 million but decreased 23.6% year over year.

Jack in the Box Comps Discussion

Comps at Jack in the Box’s stores inched up 0.6% compared to the prior-year quarter’s decline of 1.6%. The uptick was driven by average check growth of 2.6%, partially offset by a 2.0% decline in transactions. In second-quarter fiscal 2018, the company had reported comps growth of 0.9%.

Same-store sales at franchised stores rose 0.5% compared with a gain of 0.1% in the prior-year quarter. The metric declined 0.2% in the previous quarter. System-wide same-store sales were up 0.5% compared to a decline of 0.2% and 0.1% in the year-ago quarter and second-quarter fiscal 2018, respectively.

Operating Highlights

Jack in the Box’s consolidated restaurant operating margin was 23.9%, up 460 basis points (bps) year over year.

Restaurant-level EBITDA increased 430 bps from the year-ago quarter to 27.5%. The upside was owing to benefits from refranchising, partially offset by wage inflation as well as higher repairs and maintenance costs.

In the fiscal third quarter, franchise operating margin was 51.8%, down 90 bps year over year. Franchise EBITDA was 60.2%, reflecting a year-over-year decline of 80 bps. The downside can be attributed to rise in costs in the current quarter.

Jack In The Box Inc. Price, Consensus and EPS Surprise

Balance Sheet

As of Jul 2, 2018, cash totaled $0.1 million compared with $4.5 million as of Oct 1, 2017 (end of fourth-quarter and fiscal 2017). Inventories in the quarter under review amounted to $2.1 million, down from $3.4 million at the end of fiscal 2017.

Long-term debt summed $953.4 million as of Jul 2, 2018 compared with $1,080 million at the end of fiscal 2017. Cash flows from operating activities declined to $59.4 million in the third quarter compared with $106.7 million at the prior-year quarter end.

Additionally, Jack in the Box resumed share buyback program in the reported quarter and repurchased $100 million of stocks. The company also authorized $181 million of share repurchase program.

Fourth-quarter Guidance

For the fiscal fourth quarter, comps are expected to increase in the range of 1-2% compared to a 1% decline in the year-ago quarter.

2018 Outlook

Comps at Jack in the Box system restaurants are envisioned to be in the range of flat to up 0.5% compared with the prior projection of flat to up 1%. Meanwhile, the company continues to expect Restaurant-Level EBITDA within the 26-27% band.

For fiscal 2018, adjusted EBITDA is anticipated between approximately $260 million and $270 million. Capital expenditures are estimated roughly in the range of $30-$35 million.

Long-term Guidance

Jack in the Box provided long-term guidance from fiscal 2019 through 2022. It anticipates system-wide sales to be nearly $4 billion in fiscal 2022, courtesy of low single-digit growth in both annual same-store sales and system-wide unit. Free cash flow is expected to increase to $175 million by 2022.

Zacks Rank & Peer Releases

Jack in the Box carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

McDonald's (MCD - Free Report) reported impressive second-quarter 2018 results, wherein both the top and bottom line surpassed the Zacks Consensus Estimate. Adjusted earnings of $1.99 per share surpassed the consensus mark of $1.92 by 3.6% and increased 15% from the year-ago quarter (12% in constant currencies).

Darden (DRI - Free Report)     posted better-than-expected results in the fourth quarter of fiscal 2018. Adjusted earnings of $1.39 per share outpaced the consensus estimate of $1.35 by 3%. The bottom line also increased 17.8% year over year on the back of increased sales.

Chipotle (CMG - Free Report) delivered better-than-expected results in the second quarter of 2018. Adjusted earnings of $2.87 per share topped the Zacks Consensus Estimate of $2.78 by 3.2%. The bottom line also grew 23.7% from the year-ago quarter number, courtesy of higher sales and lower food costs.

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