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Jack In The Box Down 4% Since Earnings Report: Can It Rebound?

It has been more than a month since the last earnings report for Jack In The Box Inc. (JACK - Free Report). Shares have lost about 4% in that time frame.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Jack in the Box Q4 Earnings & Revenues Lag Estimates

Jack in the Box reported fourth-quarter fiscal 2017 results, with both earnings and revenues missing the Zacks Consensus Estimate.

Earnings and Revenue Discussion

Adjusted earnings per share of 73 cents lagged the Zacks Consensus Estimate of 89 cents by 18%. Further, the bottom line declined 24.3% year over year primarily due to lower revenues and restaurant operating margins.

Revenues of $338.7 million missed the Zacks Consensus Estimate of $342.5 million by 1.1%. Moreover, the top line fell 15% on a year-over-year basis owing to lower Jack in the Box and Qdoba brand sales.

Behind the Headline Numbers

Comps at Jack in the Box company stores declined 2%, comparing unfavorably with the prior-year quarter fall of 0.5% and last quarter’s decline of 1.6%. Notably, a 5.4% decrease in transactions was partially offset by an average check growth of 3.4%.

Same-store sales at franchised stores declined 0.7%, comparing unfavorably with the gain of 2.4% in the year-ago quarter and the gain of 0.1% in the previous quarter. System same-store sales fell 1% against rise of 2% in the comparable period last year and prior-quarter comps decline of 0.2%.

Comps at company-owned Qdoba restaurants were down 4%, reflecting 6.4% decrease in transactions, partially offset by growth in average check and catering sales. This decline compared unfavorably with the prior-quarter decrease of 1.1% and the prior-year quarter rise of 1.2%.

Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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Comps at franchised restaurants remained flat during the quarter, comparing unfavorably with the increase of 2.3% in the prior quarter and the year-ago comps growth of 0.4%. Also, system same-store sales were down 2.1% against a respective gain of 0.8% and 0.5% in the year-ago quarter and the last quarter.

The company’s consolidated restaurant operating margin was 15.8% of total sales, down 390 basis points (bps) year over year. Operating margin contracted 180 bps for the Jack in the Box company restaurants due to sales deleverage, elevated labor costs and higher repairs and maintenance costs, partially offset by a decrease in food and packaging costs and the benefit of refranchising activities in 2017.

Also, at the Qdoba restaurants, operating margin contracted 610 bps due to costs associated with new restaurant openings, an increase in food and packaging costs, impact of wage inflation and sales deleverage as well as commodity inflation.

SG&A expenses in the fiscal fourth quarter, as a percentage of revenues, were 10.6%. The figure was down 150 bps from the prior-year quarter. This reflects the impact of the company's restructuring activities, a $2.1-million decline in pension and postretirement benefits, reduced insurance costs as well as lower incentive compensation.

Fiscal 2017 Highlights

For fiscal 2017, the company posted operating earnings per share of $3.88 compared with $3.86 last year.

Total revenues were $1.55 billion as compared with $1.6 billion in fiscal 2016.

During fiscal 2017, the company repurchased approximately 3,220,000 shares at an average price of $101.59 for an aggregate cost of $327.2 million.

For 2018, the company has decided to issue a fiscal guidance post the completion of the Qdoba evaluation process.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

Jack In The Box Inc. Price and Consensus

Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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VGM Scores

At this time, Jack In The Box's stock has a poor Growth Score of F, however, its Momentum is doing a bit better with a D. Charting a similar path, the stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

While estimates have been broadly trending downward for the stock, the magnitude of these revisions has been net zero. It's no surprise that the stock has a Zacks Rank #5 (Strong Sell). We are looking for a below average return from the stock in the next few months.

Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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