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Jack in the Box Posts Mixed Fourth-Quarter Earnings

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Jack in the Box

After the market closed on November 19, Jack in the Box (JACK) posted its fourth-quarter earnings. The fourth quarter ended on September 30. For the quarter, the company posted an adjusted EPS of $0.77, which fell short of analysts’ expectation of $0.85. However, the company’s revenues of $177.5 million beat analysts’ expectation of $176.0 million. The company’s board announced that it increased its authorization to repurchase shares by $60 million. The higher share repurchase authorization and better-than-expected sales appear to have led to an increase in Jack in the Box’s stock price. The company was trading 1.8% higher in the after-market trading hours on November 19.

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Revenues declined

Jack in the Box’s revenues have declined 23.5% year-over-year due to refranchising company-owned restaurants. The company’s management stated that Jack in the Box completed the refranchising initiative by refranchising eight more restaurants in the fourth quarter, which increased the ownership of franchised restaurants to 94%. During the fourth quarter, the revenues from company-owned restaurants declined 44.8% to $76.9 million. The unit count of company-owned restaurants declined to 137 restaurants—compared to 276 restaurants at the end of the fourth quarter of 2017. However, some of the declines were offset by positive SSSG (same-store sales growth) of 0.8%.

The rental revenues and royalties collected from franchisees increased 8.3% to $100.6 million during the fourth quarter due to an increased unit count of franchised restaurants from 1,975 restaurants in the fourth quarter of 2017 to 2,100 restaurants and positive SSSG of 0.4%.

EPS growth

Jack in the Box has posted an EPS of $0.68. However, removing one-time items, the company’s adjusted EPS stood at $0.77, which represents a rise of 5.5% from $0.73 in the fourth quarter of 2017. The EPS growth was driven by the expanded adjusted EBITDA margin, the lower effective tax rate, and share repurchases. During the fourth quarter, the company’s adjusted EBITDA margin expanded from 26.8% to 30.4%. The company’s effective tax rate stood at 24.1% for the quarter—compared to 38.2% in the fourth quarter of 2017.

Moving to share repurchases, Jack in the Box has repurchased 3.9 million shares for $340 million in 2018.

Outlook

For 2019, Jack in the Box’s management expects its SSSG to be 0%–2.0%. Management expects to open 25–35 new restaurants—the majority being franchised restaurants. The company’s adjusted EBITDA is expected to be $260 million–$270 million. Management expects the company’s tax rate to be 26%–27% in 2019.

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