Why Is Jack In The Box (JACK) Down 73.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Jack In The Box (JACK). Shares have lost about 73.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Jack in the Box Q1 Earnings Lag, Revenues Top Estimates

Jack in the Box reported first-quarter fiscal 2020 results, wherein earnings missed the Zacks Consensus Estimate, while revenues beat the same.

Adjusted earnings from continuing operations came in at $1.17 per share, missing the Zacks Consensus Estimate of $1.37 and declined 13.3% on a year-over-year basis. However, total revenues of $307.7 million surpassed the consensus mark of $296 million and improved 5.8% year over year.

Comps Discussion

Comps at Jack in the Box’s stores improved 2.9% compared with the prior-year quarter’s 0.5% growth. This upside can be attributed to average check and transactions growth of 2.6% and 0.3%, respectively. In fourth-quarter fiscal 2019, the company had reported 3.5% comps growth.

Same-store sales at franchised stores increased 1.6% compared with a 0.1% decline in the prior-year quarter. In the last reported quarter, the metric was up 3%. Meanwhile, system-wide same-store sales improved 1.7% against a decline of 0.1% in the year-ago quarter. In fourth-quarter fiscal 2019, system-wide same-store sales rose 3%.

Operating Highlights

Restaurant-level adjusted margin contracted 140 bps in the first quarter from the year-ago quarter to 24.8%. The downside was primarily due to wage and commodity inflation, which offset benefits from decline in maintenance and repair expenses. Further, food and packaging costs increased 100 basis points owing to higher ingredient costs. Franchise level margin was 38.5% compared with 42.6% in the prior-year quarter.

Balance Sheet

As of Jan 19, 2020, cash totaled $19.9 million compared with $125.5 million as of Sep 29, 2019. Inventories in the quarter under review amounted to $2 million, compared with $1.8 million in at the end of Sep 29, 2019. Long-term debt totaled $1,262.7 million as of Jan 19, 2020, compared with $1,274.4 million at the end of Sep 29, 2019. Cash flows from operating activities decreased to $22.7 million in the first quarter from $37.6 million at the prior-year quarter end.

Jack in the Box repurchased 1.9 million shares worth $153.5 million in the first quarter. Currently, it has $122 million left under the current authorization.

2020 Outlook

The company has reaffirmed fiscal 2020 guidance. For fiscal 2020, comps at Jack in the Box’s system restaurants are projected to increase 1.5-3%. Meanwhile, the company anticipates Restaurant-Level margin of nearly 25%.

Adjusted EBITDA is anticipated between approximately $265 million and $275 million. Capital expenditures are estimated between $45 million and 55 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Jack In The Box has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 upward 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.