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Jack in the Box (JACK) Q1 Earnings Lag, Revenues Top Estimates

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Jack in the Box Inc. JACK reported first-quarter fiscal 2020 results, wherein earnings missed the Zacks Consensus Estimate, while revenues beat the same. Following the quarterly results, shares of the company declined 1.8% in after-hours trading on Feb 19.

Adjusted earnings from continuing operations came in at $1.17 per share, missing the Zacks Consensus Estimate of $1.37 and declined 13.3% on a year-over-year basis. However, total revenues of $307.7 million surpassed the consensus mark of $296 million and improved 5.8% year over year.

Comps Discussion

Comps at Jack in the Box’s stores improved 2.9% compared with the prior-year quarter’s 0.5% growth. This upside can be attributed to average check and transactions growth of 2.6% and 0.3%, respectively. In fourth-quarter fiscal 2019, the company had reported 3.5% comps growth.

Same-store sales at franchised stores increased 1.6% compared with a 0.1% decline in the prior-year quarter. In the last reported quarter, the metric was up 3%. Meanwhile, system-wide same-store sales improved 1.7% against a decline of 0.1% in the year-ago quarter. In fourth-quarter fiscal 2019, system-wide same-store sales rose 3%.

Operating Highlights

Restaurant-level adjusted margin contracted 140 bps in the first quarter from the year-ago quarter to 24.8%. The downside was primarily due to wage and commodity inflation, which offset benefits from decline in maintenance and repair expenses. Further, food and packaging costs increased 100 basis points owing to higher ingredient costs. Franchise level margin was 38.5% compared with 42.6% in the prior-year quarter.

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

Balance Sheet

As of Jan 19, 2020, cash totaled $19.9 million compared with $125.5 million as of Sep 29, 2019. Inventories in the quarter under review amounted to $2 million, compared with $1.8 million in at the end of Sep 29, 2019. Long-term debt totaled $1,262.7 million as of Jan 19, 2020, compared with $1,274.4 million at the end of Sep 29, 2019. Cash flows from operating activities decreased to $22.7 million in the first quarter from $37.6 million at the prior-year quarter end.

Jack in the Box repurchased 1.9 million shares worth $153.5 million in the first quarter. Currently, it has $122 million left under the current authorization.

2020 Outlook

The company has reaffirmed fiscal 2020 guidance. For fiscal 2020, comps at Jack in the Box’s system restaurants are projected to increase 1.5-3%. Meanwhile, the company anticipates Restaurant-Level margin of nearly 25%.

Adjusted EBITDA is anticipated between approximately $265 million and $275 million. Capital expenditures are estimated between $45 million and 55 million.

Jack in the Box currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Key Picks

Other stocks, which warrant a look in the same space include Brinker International, Inc. EAT, Good Times Restaurants Inc. GTIM and Chipotle Mexican Grill, Inc. CMG, all carrying a Zacks Rank #2.

Current-year earnings for Brinker International and Good Times Restaurants are expected to rise 10.2% and 10.5%, respectively.

Chipotle Mexican Grill has an expected three-five year EPS growth rate of 19.3%.

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