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Jack in the Box (JACK) Stock Down on Q2 Earnings & Sales Miss

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Jack in the Box Inc. JACK reported lower-than-expected results in second-quarter fiscal 2018. On Mar 21, 2018, the company accomplished the sell-out of its subsidiary — Qdoba Restaurant Corporation — to private equity firm Apollo Global Management, LLC.

Adjusted earnings from continuing operations came in at 80 cents per share, which missed the Zacks Consensus Estimate of 86 cents. The bottom-line figure also decreased nearly 7% year over year. Total sales of $209.8 million lagged the consensus mark of $213 million and decreased 21.1% on a year-over-year basis.

Following its earnings release on May 16, shares of the company decreased 3% in after-hours trading. In a year’s time, Jack in the Box lost 12.1% against the industry’s gain of 4.3%.

Jack in the Box Comps Discussion

Comps at Jack in the Box’s stores inched up 0.9% compared to the prior-year quarter’s decline of 2.4%. In the first-quarter fiscal 2018, the company had reported comps growth of 0.2% driven by average check growth of 2.6%, partially offset by a 1.7% decline in transactions.

Same-store sales at franchised stores slipped 0.2% compared with a decline of 0.4% in the year-ago quarter and 0.3% in the previous quarter. System-wide same-store sales dipped 0.1%, narrower than the decline of 0.8% in the prior-year quarter and 0.2% in the first-quarter fiscal 2018.


Operating Highlights

The company’s consolidated restaurant operating margin was 22.7%, up 300 basis points (bps) year over year.

Restaurant-level EBITDA increased 250 bps from the year-ago quarter to 26.4%. The upside was owing to benefits from refranchising, partially offset by commodity inflation as well as higher repairs and maintenance costs.

In the fiscal second quarter, franchise operating margin was 51.5%, down 160 bps year over year. Franchise EBITDA was 59.8%, reflecting a year-over-year decline of 140 bps. The downside can be attributed to a decrease in franchise-operated restaurant comps and rise in costs in the current quarter.

Balance Sheet

As of Apr 15, 2018, cash totaled $1.2 million compared with $4.5 million as of Oct 1, 2017 (end of fourth-quarter and fiscal 2017). Inventories in the second quarter amounted to $2.6 million, down from $3.4 million at the end of fiscal 2017.

Long-term debt was $900.4 million as of Apr 15, 2018 compared with $1,080 million at the end of fiscal 2017. Cash flows from operating activities declined to $29.3 million in the second quarter compared with $11.5 million at the prior-year quarter end.

Additionally, Jack in the Box resumed share buyback program in the second quarter and repurchased $100 million of stocks. The company also authorized $200 million of share repurchase program.

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

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


Third-Quarter Fiscal 2018 Guidance

For the fiscal third quarter, comps are expected in the range of flat to up 1% at Jack in the Box system restaurants compared with a 0.2% decline in the year-ago quarter.

Fiscal 2018 Outlook

Comps at Jack in the Box system restaurants are envisioned to be in the range of flat to up 1% compared with the prior projection of 1-2% increase. Meanwhile, the company continues to expect Restaurant-Level EBITDA within the 26-27% band.

For fiscal 2018, adjusted EBITDA is anticipated between approximately $260 million and $270 million. Capital expenditures are estimated roughly in the range of $30-$35 million.

Zacks Rank & Peer Releases

Jack in the Box carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Darden DRI reported mixed third-quarter fiscal 2018 results, wherein earnings surpassed the Zacks Consensus Estimate but sales lagged the same. Adjusted earnings of $1.71 per share increased 29.5% year over year on the back of increased sales.

Restaurant Brands’ QSR first-quarter 2018 earnings and sales outpaced the Zacks Consensus Estimate. Earnings under the previous accounting standard came in at 67 cents, improving 86.1% year over year.

Chipotle’s CMG first-quarter 2018 earnings surpassed analysts’ expectations, while sales came in line with the same. Adjusted earnings of $2.13 per share surged 33.1% from the year-ago quarter, courtesy of improved sales and lower food costs.

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