Third fiscal quarter performance
Jack in the Box (JACK) posted an EPS of $1.70. Removing one-time items, the company’s adjusted EPS was at $1.0 and outperformed analysts’ expectation of $0.88. The company’s EPS rose 1.0% year-over-year from $0.99 in the third quarter of 2017. Jack in the Box’s EPS growth was driven by the expanded EBIT margin, the lower effective tax rate, and share repurchases.
Jack in the Box’s EBIT margin has improved from 15.5% to 26.4% due to refranchising company-owned restaurants, sales leverage from positive SSSG (same-store sales growth), and lower G&A (general and administrative) costs. The improvement was partially offset by increased labor expenses and higher repair and maintenance costs. The G&A expenses declined due to a transition service income of $3.6 million from the sale of Qdoba, higher expenses in the previous year due to refranchising 31 restaurants, and a decline in share-based compensation and pension costs.
Jack in the Box’s effective tax rate was at 26.5% for the quarter—compared to 32.1% in the same quarter of the previous year. The company has repurchased 2.3 million shares for ~$200 million in the last four quarters. Share repurchases drive the company’s EPS by lowering the number of shares outstanding.
For the next four quarters, analysts expect Jack in the Box to post an EPS of $4.37, which represents 16.2% growth from $3.76 in the same four quarters the previous year. The EPS growth will likely be driven by the expanded EBIT margins, lower effective tax rate, and share repurchases. By the end of the quarter, Jack in the Box had $181 million still available under its share repurchase program.
Next, we’ll discuss Jack in the Box’s valuation multiple.