Why Is Jack In The Box (JACK) Up 15.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Jack In The Box (JACK). Shares have added about 15.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Jack In The Box due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Jack in the Box Q4 Earnings Lag Estimates, Revenues Top
Jack in the Box reported mixed fourth-quarter fiscal 2023 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. The top and the bottom line declined from the prior-year quarter’s levels.
Earnings & Revenues Details
During the fiscal fourth quarter, adjusted earnings from continuing operations came in at $1.09 per share. The figure missed the Zacks Consensus Estimate of $1.15. The metric declined 18% from $1.33 reported in the prior-year quarter.
Quarterly revenues of $372.5 million beat the Zacks Consensus Estimate of $368 million by 1.2%. However, the top line dropped 7.5% on a year-over-year basis.
Franchise rental revenues increased 6.6% year over year to $86 million. Franchise royalties and other revenues dropped 3% year over year to $55.2 million. This figure compares with our projection of $51.6 million.
Franchise contributions to advertising and other services revenues rose 11.2% year over year to $56.4 million. This figure compares to our projection of $50.3 million.
Company restaurant sales during the quarter came in at $175 million (compared with $214.5 million reported in the prior-year quarter). This figure compares to our projection of $208.4 million.
Comps Discussion
In the quarter under review, comps at Jack in the Box’s stores increased 4.4% year over year compared with 11.4% growth reported in the prior-year quarter. The upside was primarily driven by a 7.6% increase in pricing. However, this was partially offset by a decline in transactions and a negative mix due to fewer drink attachments and items per check. Our estimate for the metric was 6.3%.
Same-store sales at franchised stores increased 3.8% year over year compared with 3.2% growth reported in the prior-year quarter.
Systemwide same-store sales increased 3.9% year over year compared with 4% growth reported in the year-ago quarter.
Del Taco Performance
During fourth-quarter fiscal 2023, same-store sales declined 1.5%, comprising franchise same-store sales fall of 1.5% and company-operated same-store sales fall of 1.4%.
Operating Highlights
During the fiscal fourth quarter, restaurant-level adjusted margin came in at 20.7% compared with 16.2% in the prior-year quarter. The upside was driven by menu price increases and a change in the mix of restaurants. However, this was partially offset by inflationary increases in wages, food and packaging costs and utilities.
Food and packaging costs (as a percentage of company restaurant sales) fell 170 basis points (bps) year over year to 29.2%.
The franchise level margin was 39.9% in the fiscal fourth quarter compared with 42.4% reported in the prior-year quarter. Our estimate for the metric was 38.6%.
During the quarter, selling, general and administrative expenses accounted for 11.7% of total revenues (compared with 9.3% in the prior-year quarter). Our estimate for the metric was 11.3%.
Balance Sheet
As of Oct 1, 2023, cash totaled $157.7 million compared with $108.9 million as of Oct 2, 2022. Inventories during the quarter came in at $3.9 million compared with $5.3 million reported in the year-ago quarter. Long-term debt (net of current maturities) totaled $1.7 billion as of Oct 1, 2023, compared with $1.8 billion at the end of Oct 2, 2022.
During fiscal 2023, the company repurchased nearly 1.1 million shares for an aggregate cost of $90.7 million. On Nov 16, 2023, the management authorized a share repurchase program for $250.0 million.
The company declared a cash dividend of 44 cents per share. The dividend will be paid out on Dec 28, 2023, to shareholders on record as of Dec 14, 2023.
Fiscal 2024 Outlook
For the fiscal 2024, the company anticipates Adjusted EBITDA to be in the range of $325-$335 million. Depreciation and Amortization expenses are anticipated to be between $61 million and $63 million.
Company-wide CapEx and Other Investments in fiscal 2024 are expected in the range of $110-120 million. SG&A expenses are estimated to be $165-175 million.
Jack in the Box Restaurant Level Margin is expected to be in the range of 21-23%. Del Taco Restaurant Level Margin is expected to be in the range of 14-16%. The company expects Same Store sales for Jack in the Box and Del Taco to be in the low-to-mid single digits.
Company-wide operating earnings per share for fiscal 2024 are expected in the range of $6.25-$6.50.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -6.18% due to these changes.
VGM Scores
At this time, Jack In The Box has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Jack In The Box has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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