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Jack in the Box (JACK) Outruns Peers, Soars 249% in 6 Months

Zacks Equity Research
·3 mins read

Despite the coronavirus pandemic, the restaurant industry has gained 53.5% in the past six months, compared with the S&P 500 rally of 38.6%. Jack in the Box Inc. JACK, which belongs to the same industry, has gained 249% in the past six months. We believe there is still momentum left in this Zacks Rank #2 (Buy) stock. This is because the company has an expected long-term earnings growth rate of 10.6%.

Moreover, an upward revision in earnings estimates for fiscal 2020 reflects analysts’ confidence in the company’s potential. Over the past 60 days, the Zacks Consensus Estimate for its earnings in fiscal 2020 has moved up 14.5% to $4.1.

Let’s delve deeper into other factors that have kept Jack in the Box ahead of its peers.

Factors Driving Growth

Jack in the Box has been increasingly focusing on delivery channels, which is a growing area for the industry. Given the high demand for this service, the company has undertaken third-party delivery channels to bolster transactions and sales. The company partnered with DoorDash, Postmates, Grubhub and Uber Eats. It is expanding its mobile application in a few markets that support order-ahead functionality and payment.


Notably, sales in the third quarter were primarily driven by solid performance of Tiny Taco, homestyle chicken sandwich and Classic Buttery Jack. It not only regained trust of customers but also witnessed repetitive guest ordering. Also, the company’s newly-launched popcorn chicken witnessed positive response in the markets. The company is shifting focus to travel-indulgent food that offers great overall value. Thus, increased focus on food packaging and portability is likely to boost customer experience in the days ahead.

Comps at Jack in the Box’s stores increased 4.1% in the fiscal third quarter compared with 2.8% growth in the prior-year quarter. This upside can be primarily attributed to growth of 20.2% in average check, partially offset by a decline of 16.1% in transactions. Same-store sales at franchised stores improved 6.9% compared with growth of 2.7% in the prior-year quarter, resulting in higher royalties and percentage rent for the company. Meanwhile, system-wide same-store sales increased 6.6% compared with growth of 2.7% in the year-ago quarter.

Various initiatives like regular menu innovation, and increased focus on catering, delivery and marketing are expected boost sales, going forward.

Other Key Picks

Some other top-ranked stocks in the same space, which warrant a look, include Brinker International, Inc. EAT, Darden Restaurants, Inc. DRI and Domino's Pizza, Inc. DPZ. Brinker sports a Zacks Rank #1 (Strong Buy), while Darden and Domino's carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Brinker has a three-five year earnings per share growth rate of 11.4%.

Darden has a trailing four-quarter earnings surprise of 8.1%, on average.

Domino's fiscal 2020 earnings are expected to rise 33.8%.

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