Jack in the Box (NASDAQ:JACK) earnings report for the 3rd quarter of their 2020 fiscal year
Category: Jack in the Box (JACK)
Date: 6 October 2020 Stock Price of Jack in the Box: $84.46 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 group reported a 9% increase in revenues for the quarter compared to the same quarter of the previous year and reported net income for the quarter of $32.55 million.
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In my first six weeks as CEO, I have witnessed the nimbleness and passion within this brand. I am proud of the way our franchisees, the teams in our restaurants, our employees, and our partners have responded swiftly to the changing occasions of our consumers amidst the pandemic - Darin Harris, chief executive officer"
About Jack in the Box (JACK)
Jack in the Box Inc., based in San Diego, California, operates and franchises 2,243 Jack in the Box ® quick-service restaurants (“QSRs”). Jack in the Box opened its first restaurant in 1951 and has since become one of the nation’s largest hamburger chains. Based on number of restaurants, our top 10 major markets comprise approximately 70% of the total system, and Jack in the Box is at least the second largest QSR hamburger chain in eight of those major markets. As of the end of our fiscal year on September 29, 2019, the Jack in the Box system included 2,243 restaurants in 21 states and Guam, of which 137 were company-operated and 2,106 were franchise-operated. Through the execution of our refranchising strategy over the last five years, we have increased franchise ownership of the Jack in the Box system from 81% at the end of fiscal 2014 to 94% at the end of fiscal 2019 as we completed our refranchising program. In fiscal 2019, our franchisees developed 19 new franchise restaurants, and we expect the majority of new unit growth will be through franchise restaurants. Our long-term goals are focused on meeting evolving customer needs, with emphasis on improving operations consistency and targeted investments designed to maximize our returns.
Overview of Jack in the Box's 3rd quarter 2020 earnings report
The data refers to the latest quarter unless specified otherwise
- Total revenues: $242.275 million (up from $222.359 million for the same quarter of the previous year)
- Total revenues increased by 8.9% over the last 12 months
- Operating costs and expenses: $180.485 million (up from $174.098 million for the same quarter of the previous year)
- Operating costs and expenses increased by 3.6% over the last 12 months
- Net earnings: $32.555 million (up from $13.189 million for the same quarter of the previous year)
- Diluted earnings per share: $1.42 (up from $0.50 for the same quarter of the previous year)
- PE ratio of Jack in the Box: 28.8
- Diluted shares in issue: 22.916 million (down from 26.176 million for the same quarter of the previous year)
- Cash and cash equivalents: $159.540 million
- Cash and equivalents per share: $6.96
- Cash and equivalents makes up 8.2% of Jack in the Box's market capital
- Cash and equivalents makes up 8.4% of Jack in the Box's total assets
- Accounts receivable: $88.242 million
- Accounts receivable makes up 4.7% of Jack in the Box's total assets
- Cash generated from operations (for the three quarters of fiscal 2020): $90.168 million
- Cash generated from operations per share (for the three quarters of fiscal 2020): $3.93
Jack in the Box's management commentary on their 3rd quarter 2020 earnings
SAN DIEGO--(BUSINESS WIRE)--Aug. 5, 2020-- Jack in the Box Inc. (NASDAQ: JACK) today reported financial results for the third quarter ended July 5, 2020.
Jack in the Box® system same-store sales increased 6.6 percent for the quarter. Company same-store sales increased 4.1 percent in the third quarter driven by average check growth of 20.2 percent while transactions decreased 16.1 percent.
Darin Harris, chief executive officer, said, "In my first six weeks as CEO, I have witnessed the nimbleness and passion within this brand. I am proud of the way our franchisees, the teams in our restaurants, our employees, and our partners have responded swiftly to the changing occasions of our consumers amidst the pandemic. Our strong performance in the third quarter is a testament to this agile approach. Our focus on value combined with indulgent and flavorful products continues to drive overall performance for the brand.
This strong performance accelerated throughout the third quarter, and has continued thus far into the fourth quarter. I am excited about taking the earnings from this uncertain time and using them to fuel the remaining part of 2020 as well as our strategy into 2021." Earnings from continuing operations were $32.2 million, or $1.40 per diluted share, for the third quarter of fiscal 2020 compared with $13.5 million, or $0.51 per diluted share, for the third quarter of fiscal 2019.
Jack in the Box® system same-store sales increased 6.6 percent for the quarter. Company same-store sales increased 4.1 percent in the third quarter driven by average check growth of 20.2 percent while transactions decreased 16.1 percent.
Darin Harris, chief executive officer, said, "In my first six weeks as CEO, I have witnessed the nimbleness and passion within this brand. I am proud of the way our franchisees, the teams in our restaurants, our employees, and our partners have responded swiftly to the changing occasions of our consumers amidst the pandemic. Our strong performance in the third quarter is a testament to this agile approach. Our focus on value combined with indulgent and flavorful products continues to drive overall performance for the brand.
This strong performance accelerated throughout the third quarter, and has continued thus far into the fourth quarter. I am excited about taking the earnings from this uncertain time and using them to fuel the remaining part of 2020 as well as our strategy into 2021." Earnings from continuing operations were $32.2 million, or $1.40 per diluted share, for the third quarter of fiscal 2020 compared with $13.5 million, or $0.51 per diluted share, for the third quarter of fiscal 2019.
Results for the third quarter reflect the business and financial impacts of the COVID-19 pandemic, which include the following:
Capital Allocation and Liquidity Position
The company did not repurchase any shares in the third quarter of fiscal 2020, and as announced on April 15, 2020, temporarily suspended its share repurchase program. This leaves approximately $122 million remaining under share repurchase programs authorized by its Board of Directors, consisting of $22 million remaining that expire in November 2020 and approximately $100 million remaining that expire in November 2021.
The company also announced today that on July 31, 2020, 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 3, 2020, to shareholders of record at the close of business on August 18, 2020. The reinstatement of the dividend reflects the strong financial health of the company and continued commitment to shareholders.
As of the end of the third quarter, the company had approximately $196.9 million in cash, of which $159.5 million was unrestricted cash.
- Restaurant traffic declined substantially, although did improve versus the last five weeks of the second quarter. Check growth continued to drive overall same-store sales growth.
- Higher costs for delivery fees and supplies related to COVID-19 increased Occupancy and Other as a percentage of company restaurant sales by 90 basis points.
- Higher costs for a new emergency paid sick leave program increased Labor as a percentage of company restaurant sales by 30 basis points.
- The company did not provide any additional relief to franchisees in the form of marketing fee reduction or postponement or rent postponement in the third quarter. The marketing fee reduction in April, however, did impact slightly over two weeks of the third quarter, resulting in lower Advertising costs by $0.1 million, and reduced Franchise Contributions for Advertising by approximately $2.9 million.
- The company implemented a short-term cash preservation strategy, and as such, did not buy back any shares in the third quarter. The company also significantly reduced capital spending.
Capital Allocation and Liquidity Position
The company did not repurchase any shares in the third quarter of fiscal 2020, and as announced on April 15, 2020, temporarily suspended its share repurchase program. This leaves approximately $122 million remaining under share repurchase programs authorized by its Board of Directors, consisting of $22 million remaining that expire in November 2020 and approximately $100 million remaining that expire in November 2021.
The company also announced today that on July 31, 2020, 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 3, 2020, to shareholders of record at the close of business on August 18, 2020. The reinstatement of the dividend reflects the strong financial health of the company and continued commitment to shareholders.
As of the end of the third quarter, the company had approximately $196.9 million in cash, of which $159.5 million was unrestricted cash.
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 $77.40 and its currently trading at $84.46. That's a very average return of 9.1% provided to Jack in the Box stockholders over the last 5 years.
Jack in the Box (JACK) stock vs McDonald's (MCD) stock over the last 5 years
The image below shows the stock price performance of Jack in the Box (JACK) and Mcdonald's (MCD) over the last 5 years. While they are both active in the quickserve restaurant industry and predominantly sell burgers, their stock price trends and returns are very different. The summary below shows the stock price returns over the last 5 years
- Mcdonalds (MCD): 101.7%
- Jack in the Box (JACK): 9.1%
Recent coverage of Jack in the Box (JACK)
The extract below covers the latest regarding Jack in the Box as obtained from Yahoo.com.
While it may not be enough for some shareholders, we think it is good to see the Jack in the Box Inc. (NASDAQ:JACK) share price up 10% in a single quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 18% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the three years that the share price fell, Jack in the Box's earnings per share (EPS) dropped by 9.2% each year. This fall in the EPS is worse than the 6% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.
Read the full article here
While it may not be enough for some shareholders, we think it is good to see the Jack in the Box Inc. (NASDAQ:JACK) share price up 10% in a single quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 18% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the three years that the share price fell, Jack in the Box's earnings per share (EPS) dropped by 9.2% each year. This fall in the EPS is worse than the 6% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.
Read the full article here
Jack in the Box (NASDAQ: Jack) latest stock valuation
So what is Jack in a Box stock worth based on their 3rd quarter 2020 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for Jack in the Box at $78.20 a stock.
But based on their earnings and their share buy back programs we believe the stock of Jack in the Box is slightly 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 $78.20, thus a good entry point into Jack in the Box would be at $70.40 or below.
We expect the stock of Jack in the Box to pull back slightly from current levels in coming weeks and months to levels closer to our target price (full value price). We therefore rate the stock of Jack in the Box as a hold
But based on their earnings and their share buy back programs we believe the stock of Jack in the Box is slightly 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 $78.20, thus a good entry point into Jack in the Box would be at $70.40 or below.
We expect the stock of Jack in the Box to pull back slightly from current levels in coming weeks and months to levels closer to our target price (full value price). We therefore rate the stock of Jack in the Box as a hold
Next earnings release for Jack in the Box
It is expected that Jack in the Box the will release their 1st quarter 2020 earnings report in late February 2020.