U.S. Markets open in 3 hrs 23 mins

Earnings Miss: Jack in the Box Inc. Missed EPS By 7.7% And Analysts Are Revising Their Forecasts

Simply Wall St

Last week, you might have seen that Jack in the Box Inc. (NASDAQ:JACK) released its yearly result to the market. The early response was not positive, with shares down 9.7% to US$77.81 in the past week. It looks like the results were a bit of a negative overall. While revenues of US$950m were in line with analyst predictions, earnings were less than expected, missing estimates by 7.7% to hit US$3.62 per share. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what analysts are forecasting for next year.

View our latest analysis for Jack in the Box

NasdaqGS:JACK Past and Future Earnings, November 24th 2019

Taking into account the latest results, the latest consensus from Jack in the Box's 15 analysts is for revenues of US$971.6m in 2020, which would reflect an okay 2.3% improvement in sales compared to the last 12 months. Earnings per share are expected to soar 28% to US$4.56. Yet prior to the latest earnings, analysts had been forecasting revenues of US$973.6m and earnings per share (EPS) of US$4.84 in 2020. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but analysts did make a small dip in their earnings per share forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at US$92.56, with analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Jack in the Box at US$104 per share, while the most bearish prices it at US$72.00. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Jack in the Box shareholders.

It can also be useful to step back and take a broader view of how analyst forecasts compare to Jack in the Box's performance in recent years. For example, we noticed that Jack in the Box's rate of growth is expected to accelerate meaningfully, with revenues forecast to grow at 2.3%, well above its historical decline of 13% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 7.2% per year. So although Jack in the Box's revenue growth is expected to improve, it is still expected to grow slower than the market.

The Bottom Line

The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have forecasts for Jack in the Box going out to 2023, and you can see them free on our platform here.

It might also be worth considering whether Jack in the Box's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.