A month has gone by since the last earnings report for Jack In The Box (JACK). Shares have lost about 10.2% 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 drivers.

Jack in the Box Q3 Earnings Top Estimates, Revenues Lag

Jack in the Box reported mixed third-quarter fiscal 2024 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top line declined year over year.

Earnings & Revenue Details

In the fiscal third quarter, operating earnings per share (EPS) came in at $1.65, beating the Zacks Consensus Estimate of $1.50. The metric rose 13.8% from $1.45 per share reported in the prior-year quarter.

Quarterly revenues of $369.2 million missed the consensus mark of $370 million. The top line declined 7% on a year-over-year basis.

Franchise rental revenues increased 3.3% year over year to $58.3 million. Franchise royalties and other revenues decreased 0.6% year over year to $55.3 million.

Franchise contributions to advertising and other services revenues rose 1.9% year over year to $58.3 million. Company restaurant sales in the quarter came in at $166.5 million (compared with $198.5 million reported in the prior-year quarter).

Comps Discussion

In the quarter under review, company-owned same-store sales inched up 0.1% year over year compared with 6.9% growth reported in the prior-year quarter.

Same-store sales at franchised stores declined 2.4% year over year against the growth of 8% reported in the prior-year quarter.

Systemwide same-store sales fell 2.2% year over year against 7.9% growth reported in the year-ago quarter. Reduced transactions and an unfavorable mix shift caused the downside.

Del Taco Performance

In third-quarter fiscal 2024, company-owned same-store sales moved down 3.5% year over year, comprising the decline in franchise same-store and system-operated same-store sales of 4.1% and 3.9%, respectively.

Operating Highlights

In the fiscal third quarter, the total restaurant-level adjusted margin came in at 21% compared with 21.8% reported in the prior-year quarter. The metric’s decline was primarily due to increased costs for labor as well as other restaurant operations, marginally overshadowed by lower food and packaging costs.

Food and packaging costs (as a percentage of company restaurant sales) fell 170 basis points (bps) year over year to 27.8%.

The total franchise level margin was 41.1% in the fiscal third quarter, flat year over year.

In the quarter under review, selling, general and administrative expenses accounted for 8% of total revenues, compared with 10% in the prior year quarter.

Balance Sheet

As of Jul 7, 2024, cash totaled $21.6 million compared with $157.7 million as of Oct 1, 2023. Inventories during the quarter came in at $4.1 million, flat sequentially. Long-term debt (net of current maturities) totaled $1.71 billion as of Jul 7, compared with $1.72 billion at the end of Oct 1, 2023.

In the fiscal third quarter, the company repurchased 0.3 million shares for an aggregate cost of $15.1 million. As of Jul 7, the management stated the availability of $195 million under its share repurchase program. The company declared a cash dividend of 44 cents per share. The dividend will be paid out on Sep 19, 2024, to its shareholders on record as of Aug 30.

Fiscal 2024 Outlook

For fiscal 2024, the company anticipates Adjusted EBITDA to be in the range of $320-$325 million, down from the prior estimate of $325-$330 million. Depreciation and Amortization expenses are anticipated between $60 million and $62 million, respectively. Jack in the Box Restaurant Level Margin is expected to be 22% compared with the prior estimate of 22-23%. The company expects same-store sales for Jack in the Box and Del Taco to be down 1% and 1.5%, respectively. Company-wide operating EPS for fiscal 2024 is expected to be in the range of $6.10-$6.25, down from the prior estimate of $6.25-$6.40.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -13.9% due to these changes.

VGM Scores

Currently, Jack In The Box has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 A. 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, BJ's Restaurants (BJRI), a stock from the same industry, has gained 5.1%. The company reported its results for the quarter ended June 2024 more than a month ago.

BJ's Restaurants reported revenues of $349.93 million in the last reported quarter, representing a year-over-year change of +0.1%. EPS of $0.72 for the same period compares with $0.50 a year ago.

For the current quarter, BJ's Restaurants is expected to post earnings of $0.02 per share, indicating a change of +112.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -41.4% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for BJ's Restaurants. Also, the stock has a VGM Score of A.

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