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Category: Stock Market and Jack in the Box
Date: 20 November 2019 Stock Price: $84.92 We take a look at the 3rd quarter 2019 earnings report of Jack in the Box, one of the United States largest hamburger chains with over 2200 restaurants. The company is actively buying back their own shares, and they don't have to many issued to start off with. A good omen for stockholders in future.
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About Jack in the Box
Jack in the Box Inc. (NASDAQ: JACK), based in San Diego, is a restaurant company that operates and franchises Jack in the Box® restaurants, one of the nation’s largest hamburger chains, with more than 2,200 restaurants in 21 states and Guam.
Overview of Jack in the Box's 3rd quarter 2019 earnings report
The data refers to the latest quarter unless specified otherwise
- Total revenues: $222.359 million (up from $187.983 million for the same quarter of the previous year)
- Total revenues increased by 18.4% over the last 12 months
- Operating costs and expenses: $174.098 million (up from $111.220 million for the same quarter of the previous year)
- Operating costs and expenses increased by 56.5% over the last 12 months
- Net earnings: $13.189 million (down from $45.307 million for the same quarter of the previous year)
- Diluted earnings per share: $0.50 (down from $1.60 for the same quarter of the previous year)
- PE ratio of Jack in the Box: 22.7
- Diluted shares in issue: 26.176 million (down 7.4% from 28.296 million for the same quarter of the previous year)
- Cash and cash equivalents: $12.447 million
- Cash and equivalents per share: $0.47
- Cash and equivalents makes up 0.56% of Jack in the Box's market capital
- Cash and equivalents makes up 1.49% of Jack in the Box's total assets
- Accounts receivable: $57.647 million
- Accounts receivable makes up 6.93% of Jack in the Box's total assets
- Cash generated from operations (for the 3 quarters of fiscal 2019): $116.793
- Cash generated from operations per share (for the 3 quarters of fiscal 2019): $4.46
- Cash generated from operations per share (for the 3 quarters of fiscal 2019): $4.46
Jack in the Box's management commentary on their 3rd quarter 2019 earnings
SAN DIEGO--(BUSINESS WIRE)--Aug. 7, 2019-- Jack in the Box Inc. (NASDAQ: JACK) today reported financial results for the third quarter ended July 7, 2019.
Jack in the Box® system same-store sales increased 2.7 percent for the quarter. Company same-store sales increased 2.8 percent in the third quarter driven by average check growth as transactions improved to flat for the quarter. Lenny Comma, chairman and chief executive officer, said, "Our greater emphasis on bundled value in the third quarter resulted in a substantial improvement in both traffic and sales trends while also driving check and maintaining strong restaurant margins. Our guests have responded favorably to the breadth of our promotions, which leverage our strategy around compelling value bundles, including both new product innovation as well as guest favorites, without devaluing our core menu items. This momentum has accelerated thus far into our fourth quarter.
"With our recent refinancing completed, we've achieved our target leverage ratio of approximately 5.0 times EBITDA. We remain firmly committed to returning cash to shareholders and now have $301 million available for share repurchases. "Our long-term goals continue to center around meeting evolving consumer needs, with emphasis on improving operations consistency and targeted investments designed to maximize our returns. We remain focused on balancing the interests of all our stakeholders, including our franchisees, customers, employees and shareholders."
Jack in the Box® system same-store sales increased 2.7 percent for the quarter. Company same-store sales increased 2.8 percent in the third quarter driven by average check growth as transactions improved to flat for the quarter. Lenny Comma, chairman and chief executive officer, said, "Our greater emphasis on bundled value in the third quarter resulted in a substantial improvement in both traffic and sales trends while also driving check and maintaining strong restaurant margins. Our guests have responded favorably to the breadth of our promotions, which leverage our strategy around compelling value bundles, including both new product innovation as well as guest favorites, without devaluing our core menu items. This momentum has accelerated thus far into our fourth quarter.
"With our recent refinancing completed, we've achieved our target leverage ratio of approximately 5.0 times EBITDA. We remain firmly committed to returning cash to shareholders and now have $301 million available for share repurchases. "Our long-term goals continue to center around meeting evolving consumer needs, with emphasis on improving operations consistency and targeted investments designed to maximize our returns. We remain focused on balancing the interests of all our stakeholders, including our franchisees, customers, employees and shareholders."
Capital Allocation
The company did not repurchase any shares of its common stock in the third quarter of fiscal 2019. The company has approximately $101.0 million remaining under share repurchase programs authorized by its Board of Directors that expire in November 2019. On August 2, 2019, the company's Board of Directors authorized an additional $200.0 million share repurchase program that expires in November 2020. The company also announced today that on August 2, 2019, its Board of Directors declared a cash dividend of $0.40 per share on the company's common stock. The dividend is payable on September 10, 2019, to shareholders of record at the close of business on August 19, 2019.
Guidance
This release includes forward-looking guidance for certain non-GAAP financial measures, including Restaurant-Level Margin and Adjusted EBITDA. The company is unable without unreasonable effort to provide reconciliations of these forward-looking non-GAAP measures.
Fiscal Year 2019 Guidance
The following guidance and underlying assumptions reflect the company’s current expectations for the fiscal year ending September 29, 2019. Fiscal 2019 and fiscal 2018 are 52-week years, with 16 weeks in the first quarter, and 12 weeks in each of the second, third and fourth quarters.
Updated from prior guidance:
The company did not repurchase any shares of its common stock in the third quarter of fiscal 2019. The company has approximately $101.0 million remaining under share repurchase programs authorized by its Board of Directors that expire in November 2019. On August 2, 2019, the company's Board of Directors authorized an additional $200.0 million share repurchase program that expires in November 2020. The company also announced today that on August 2, 2019, its Board of Directors declared a cash dividend of $0.40 per share on the company's common stock. The dividend is payable on September 10, 2019, to shareholders of record at the close of business on August 19, 2019.
Guidance
This release includes forward-looking guidance for certain non-GAAP financial measures, including Restaurant-Level Margin and Adjusted EBITDA. The company is unable without unreasonable effort to provide reconciliations of these forward-looking non-GAAP measures.
Fiscal Year 2019 Guidance
The following guidance and underlying assumptions reflect the company’s current expectations for the fiscal year ending September 29, 2019. Fiscal 2019 and fiscal 2018 are 52-week years, with 16 weeks in the first quarter, and 12 weeks in each of the second, third and fourth quarters.
Updated from prior guidance:
- System same-store sales increase of at least 1.0 percent.
- Tax rate of approximately 20.0 percent, or 23.0 to 24.0 percent excluding the termination of interest rate swaps in the third quarter. The expected tax rate in the fourth quarter is approximately 26.0 to 27.0 percent. These rates are subject to fluctuations arising from the impact of excess tax benefits from share-based compensation arrangements.
- Tenant improvement allowances of approximately $15 to $20 million.
- Commodity cost inflation of approximately 2.0 percent.
- Restaurant-Level Margin of approximately 26.0 to 27.0 percent of company restaurant sales.
- SG&A as a percentage of revenues of approximately 8.5 to 9.0 percent, which reflects the new revenue recognition standard.
- G&A as a percentage of system-wide sales of approximately 1.8 to 2.0 percent, which reflects the new revenue recognition standard.
- Approximately 25 to 35 new restaurants opening system-wide, the majority of which will be franchise locations.
- Capital expenditures of approximately $30 to $35 million, excluding purchases of assets held for sale or leaseback.
- Adjusted EBITDA of approximately $260 to $270 million.
Jack in the Box (NASDAQ: JACK) stock price history
The image below, obtained from Google shows the stock price history of Jack in the Box (NASDAQ: JACK) for the last 5 years and it's been an okay time for Jack in the Box stockholders over the last 5 years. 5 years ago the stock was trading at $73.40 and its currently trading at $84.92. That's a 15.7% return provided to Jack in the Box stockholders over the last 5 years, which is by no means shooting the lights out but at least its a positive return. The stock of Jack in the Box is trading at closer to its 52 week high of $93.12 than it is to its 52 week low of $70.77 which to us is a clear indication that the short term sentiment and momentum of Jack in the Box stock is positive at this point in time.
Recent coverage of Jack in the Box
The extract below covers the latest regarding Jack in the Box as obtained from TheStreet.com. Analysts are favouring the stock due to their strong stock repurchase program.
A study of analyst recommendations at the major brokerages shows that Jack in the Box, Inc. (JACK - Get Report) is the #26 broker analyst pick among those stocks screened by The Online Investor for strong stock buyback activity. To make that list, a stock must have repurchased at least 5% of its outstanding shares over the trailing twelve month period. In forming the rank, the analyst opinions from the major brokerage houses were tallied, and averaged; then, the list of stocks with strong buyback activity was ranked according to those averages.
Investors are often keenly interested in knowing which companies are buying back their own stock, because companies often will only make such a move if they feel their stock is undervalued. Jack in the Box, Inc. is a company with strong buyback activity that is also considered a compelling buy by analysts; a bullish investor could take this to mean that sharp analyst minds came to the same bullish conclusion as the company itself that the stock is a good value, and therefore the stock should do well in the future.
A study of analyst recommendations at the major brokerages shows that Jack in the Box, Inc. (JACK - Get Report) is the #26 broker analyst pick among those stocks screened by The Online Investor for strong stock buyback activity. To make that list, a stock must have repurchased at least 5% of its outstanding shares over the trailing twelve month period. In forming the rank, the analyst opinions from the major brokerage houses were tallied, and averaged; then, the list of stocks with strong buyback activity was ranked according to those averages.
Investors are often keenly interested in knowing which companies are buying back their own stock, because companies often will only make such a move if they feel their stock is undervalued. Jack in the Box, Inc. is a company with strong buyback activity that is also considered a compelling buy by analysts; a bullish investor could take this to mean that sharp analyst minds came to the same bullish conclusion as the company itself that the stock is a good value, and therefore the stock should do well in the future.
Jack in the Box (NASDAQ: Jack) latest stock valuation
So what is Jack in a Box stock worth based on their 3rd quarter 2019 earnings report and their earnings guidance provided? Based on their earnings report and the fiscal guidance provided our valuation model provides a target (full value) price for Jack in the Box at $74.20 a stock. We therefore believe the stock of Jack in the Box is overvalued
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price, which in this case is $74.20, thus a good entry point into Jack in the Box would be at $66.80 or below.
We expect the stock of Jack in the Box to pull back strongly from current levels in coming weeks and months to levels closer to our target (full value) price. We therefore rate the stock of Jack in the Box as a sell.
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price, which in this case is $74.20, thus a good entry point into Jack in the Box would be at $66.80 or below.
We expect the stock of Jack in the Box to pull back strongly from current levels in coming weeks and months to levels closer to our target (full value) price. We therefore rate the stock of Jack in the Box as a sell.
Next earnings release for Jack in the Box
It is expected that Jack in the Box the will release their 4th quarter and full fiscal 2019 earnings report on the 20th of November 2019 after the market close