Wall Street Remains Optimistic for Jack in the Box



Shares close lower

Jack in the Box (JACK) reported its earnings on May 13, 2015, after the market closed. The next day, shares began trading at $92.79, up 1% from the previous day’s close of $91.80. The day’s high and low were $93.24 and $86.41, respectively.

Share volume was ~2.5 million shares compared to the 90-day average daily volume of ~0.6 million shares. Jack in the Box closed 4.3% down at $87.82 from the previous day’s close, according to NASDAQ.

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Investors seem spooked by lower same-store sales growth at the company’s fast-growing concept Qdoba. In 2Q15, same-store sales came in at 8.3%, compared to 14% in 1Q15. Given the muted unit growth strategy, investors are watching the same-store sales movement closely.

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Upgrades and downgrades

On May 14, 2015, Morgan Stanley maintained its “neutral” rating for Jack in the Box with a price target of $93. This was unchanged from its previous target.

Jefferies also maintained its previous “buy” recommendation with a price target of $107.

As of April 14, seven Wall Street analysts had a “buy” rating, eight had a “hold” rating, and none had a “sell” rating for Jack in the Box. The consensus target price was $102.

2Q15 estimates

Following are Wall Street’s consensus estimates for Jack in the Box in 3Q15:

  • Adjusted earnings per share estimates are $0.72.
  • Revenue estimates are $356 million.
  • Estimates for operating profits are $50 million, which would give an operating margin of 14%.
  • Adjusted net income estimates are $28 million.
  • 3Q15 earnings will likely be announced on August 5, 2015.

Yum! Brands (YUM), which operates Pizza Hut, saw its stock increase by 3%. Chipotle Mexican Grill (CMG), which reported its earnings on April 21, saw its share price decline by 6%. YUM and CMG make up 1.5% and 1% of the Consumer Discretionary Select Sector SPDR Fund (XLY), respectively. XLY also has a 3% portfolio interest in Starbucks (SBUX).


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