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Jack in the Box (JACK) Q2 Earnings Lag Estimates, Decline Y/Y

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Jack in the Box Inc. (JACK - Free Report) reported second-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 3.7% in after-hours trading on May 13.

Adjusted earnings from continuing operations came in at 50 cents per share, missing the Zacks Consensus Estimate of 68 cents and declining 49.5% on a year-over-year basis. However, total revenues of $216.1 million surpassed the consensus mark of $212 million and improved 0.2% year over year.

Owing to the unpredictability of the global pandemic, the company has withdrawn its 2020 guidance.

Jack In The Box Inc Price, Consensus and EPS Surprise

 

Comps Discussion

Comps at Jack in the Box’s stores fell 4.1% in the fiscal second quarter against the prior-year quarter’s 0.6% growth. This upside can be attributed to average check growth of 6.4%. However, transactions declined 10.5% in the quarter. 

Same-store sales at franchised stores declined 4.2% against 0.1% growth in the prior-year quarter. Meanwhile, system-wide same-store sales declined 4.3% against 0.2% growth in the year-ago quarter. 

Operating Highlights

Restaurant-level adjusted margin contracted 700 basis points (bps) in the fiscal second quarter from the year-ago quarter to 20.6%. The downside was led by decline in sales due to coronavirus along with wage and commodity inflation. Further, food and packaging costs increased 160 bps owing to higher ingredient costs, partially offset by menu price increases. Franchise level margin was 38.6% compared with 41.3% in the prior-year quarter.

Balance Sheet

As of Apr 12, 2020, cash (inclusive of restricted cash) totaled $169.2 million compared with $151.6 million as of Sep 29, 2019. Inventories in the quarter remained almost flat at $1.8 million compared to the level as of Sep 29, 2019. Long-term debt totaled $1,368.5 million as of Jan 19, 2020, compared with $1,274.4 million at the end of Sep 29, 2019. Cash flows from operating activities declined to $58.9 million in the fiscal second quarter from $60.8 million in the prior-year quarter.

Jack in the Box currently has $122 million left under the share repurchase authorization, out of which $22 million will expire in Nov 2020 and the remaining $100 million will expire in Nov 2021. The company has temporarily suspended its share repurchase program.

Zacks Rank & Key Picks

Jack in the Box currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Retail-Wholesale sector are Sprouts Farmers Market, Inc. (SFM - Free Report) , Domino's Pizza, Inc. (DPZ - Free Report) and Yum China Holdings, Inc. (YUMC - Free Report) . Sprouts Farmers sports a Zacks Rank #1 (Strong Buy), while Domino's and Yum China carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sprouts Farmers has a three-five year earnings per share growth rate of 3.7%.

Domino's has a trailing four-quarter positive earnings surprise of 12.7%, on average. The company’s earnings beat the Zacks Consensus Estimate in the last four quarters.

Earnings in 2021 for Yum China are expected to surge 79.2%.

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