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Is Jack in the Box (JACK) Poised to Ride on Growth Trajectory?

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·3 min read
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Jack in the Box Inc. JACK is benefiting from solid performance of Tiny Taco, menu innovation and digitalization. Despite the coronavirus pandemic, the company’s shares have gained 19.8% in the past year, compared with the industry’s rally of 9.8%. In fact, prospects are looking even brighter for 2021. Over the past 60 days, the Zacks Consensus Estimate for fiscal 2021 earnings has moved up 13.6% to $5.6. Moreover, the Zacks Rank #1 (Strong Buy) companies have an impressive long-term earnings growth rate of 10.6%. Let’s delve deeper and find out factors driving growth.

Jack in the Box Vs Industry Scorecard

Growth Triggers

The company comps is gaining from increase in average check. Comps at Jack in the Box’s stores increased 9.6% in the fiscal fourth quarter compared with 4.1 and 2.8% growth in the fiscal third and second quarter of 2020, respectively. This upside can be attributed to average check growth of 21.9%. However, transactions declined 12.3% in the quarter. Same-store sales at franchised stores climbed 12.4% compared with increase of 3% in the prior-year quarter. Meanwhile, system-wide same-store sales increased 12.2% compared with growth of 3% in the year-ago quarter.

Jack in the Box is also 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. It has 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, delivery sales have more than doubled in the quarter on the back of high mobile application usage.

It is one of the largest hamburger chains in the country. The company makes regular menu innovations and provides limited period offers (LPO) at both its flagship restaurants to drive long-term customer loyalty. Notably, sales in the fourth quarter were primarily driven by solid performance of Tiny Taco, homestyle chicken sandwich and Classic Buttery Jack. It not only regained trust of its customers but also witnessed repetitive guest ordering.

Other key Picks

Some better-ranked stocks in the same space are Del Taco Restaurants, Inc. TACO, Arcos Dorados Holdings Inc. ARCO and Yum! Brands, Inc. YUM, each carrying a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Del Taco Restaurants has a three-five year earnings per share growth rate of 15%.

Arcos Dorados and Yum! Brands’ 2021 earnings are expected to rise 127.3% and 12.1%, respectively.

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Jack In The Box Inc. (JACK) : Free Stock Analysis Report
Yum Brands, Inc. (YUM) : Free Stock Analysis Report
Arcos Dorados Holdings Inc. (ARCO) : Free Stock Analysis Report
Del Taco Restaurants, Inc. (TACO) : Free Stock Analysis Report
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