Why Is Jack In The Box (JACK) Down 2.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Jack In The Box (JACK). Shares have lost about 2.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Jack In The Box due for a breakout? 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 drivers.
Jack in the Box Q1 Earnings Match Estimates, Revenues Top
Jack in the Box reported mixed first-quarter fiscal 2024 results, with earnings meeting 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 first quarter, adjusted earnings from continuing operations came in at $1.95 per share. The figure was in line with the Zacks Consensus Estimate. The metric declined 3% from $2.01 reported in the prior-year quarter.
Quarterly revenues of $487.5 million beat the Zacks Consensus Estimate of $480 million by 1.5%. However, the top line declined 7.5% on a year-over-year basis. Del Taco’s refranchising efforts caused the downside.
Franchise rental revenues increased 4% year over year to $113.2 million. Franchise royalties and other revenues dropped 4% year over year to $73.3 million. This figure compares with our projection of $68.1 million.
Franchise contributions to advertising and other services revenues rose 7.3% year over year to $76.9 million. This figure compares to our projection of $68.6 million.
Company restaurant sales during the quarter came in at $224 million (compared with $270.2 million reported in the prior-year quarter). This figure compares to our projection of $238.2 million.
Comps Discussion
In the quarter under review, comps at Jack in the Box’s stores increased 2% year over year compared with 12.6% growth reported in the prior-year quarter. Our estimate for the metric was 5.7%.
Same-store sales at franchised stores increased 0.7% year over year compared with 7.4% growth reported in the prior-year quarter.
Systemwide same-store sales increased 0.8% year over year compared with 7.8% growth reported in the year-ago quarter.
Del Taco Performance
During first-quarter fiscal 2024, same-store sales increased 2.2%, comprising franchise same-store sales growth of 2.4% and company-operated same-store sales rise of 1.8%.
Operating Highlights
During the fiscal first quarter, restaurant-level adjusted margin came in at 23.1% compared with 19.8% reported in the prior-year quarter. The upside was driven by commodity deflation and sales leverage.
Food and packaging costs (as a percentage of company restaurant sales) fell 170 basis points (bps) year over year to 28.6%.
The franchise level margin was 41.2% in the fiscal first quarter compared with 44.4% reported in the prior-year quarter. Our estimate for the metric was 38.1%.
During the quarter, selling, general and administrative expenses accounted for 9.5% of total revenues. Our estimate for the metric was 9.6%.
Balance Sheet
As of Jan 21, 2024, cash totaled $54 million compared with $157.7 million as of Oct 1, 2023. Inventories during the quarter came in at $4.4 million compared with $3.9 million reported in the previous quarter. Long-term debt (net of current maturities) totaled $1.71 billion as of Jan 21, 2024, compared with $1.72 billion at the end of Oct 1, 2023.
In the fiscal first quarter, the company repurchased 0.3 million shares for an aggregate cost of $25.2 million. As of Jan 21, 2024, the management stated the availability of $225 million under its share repurchase program.
The company declared a cash dividend of 44 cents per share. The dividend will be paid out on Mar 27, 2024, to shareholders on record as of Mar 15, 2024.
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 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 (EPS) for fiscal 2024 are expected in the range of $6.25-$6.50.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, Jack In The Box has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, 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 B. 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.
Performance of an Industry Player
Jack In The Box is part of the Zacks Retail - Restaurants industry. Over the past month, Shake Shack (SHAK), a stock from the same industry, has gained 11.9%. The company reported its results for the quarter ended December 2023 more than a month ago.
Shake Shack reported revenues of $286.24 million in the last reported quarter, representing a year-over-year change of +20%. EPS of $0.02 for the same period compares with -$0.06 a year ago.
Shake Shack is expected to post earnings of $0.10 per share for the current quarter, representing a year-over-year change of +1100%. Over the last 30 days, the Zacks Consensus Estimate has changed +14%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Shake Shack. Also, the stock has a VGM Score of C.
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