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Jack in the Box Stock Rose on Strong First-Quarter Earnings

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Feb. 21 2019, Published 8:08 a.m. ET

First-quarter performance

Jack in the Box (JACK) posted its first-quarter earnings for fiscal 2019 after the market closed on February 20. For the quarter, which ended on January 20, the company posted adjusted EPS of $1.35 on revenues of $290.8 million, outperforming analysts’ EPS expectation of $1.28 and revenue estimate of  $274.43 million. The strong first-quarter earnings appear to have increased investors’ confidence, leading to a rise in the company’s stock price. Jack in the Box was trading 4.2% higher in yesterday’s after-hours trading.

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Year-to-date decline in revenue

Year-over-year, Jack in the Box’s revenue declined by 1.2% from $294.5 million in the corresponding quarter of 2018. The decline in revenue was due to the re-franchising of company-owned restaurants, which was partially offset by positive SSSG (same-store sales growth) in company-owned restaurants and the adoption of a new revenue recognition standard, which contributed $51.8 million to the company’s total revenue.

By the end of the quarter, the company operated 137 company-owned restaurants, which was 118 units fewer than the company operated in the corresponding quarter of fiscal 2018. However, the unit count of franchised restaurants increased by 109 units to 2,104 restaurants during the same period.

During the quarter, the company’s SSSG fell by 0.1% with its company-owned restaurants posting SSSG of 0.5%, while its franchised restaurants posted a decline in SSSG of 0.1%.

EPS growth

Jack in the Box posted adjusted EPS of $1.35, which represents growth of 9.8% from $1.23 in the first quarter of fiscal 2018. The lower effective tax rate and share repurchases in the last four quarters drove the company’s EPS during the quarter, which was partially offset by a lower adjusted EBIT (earnings before interest and tax) margin and a decline in revenue.

The company’s effective rate for the quarter stood at 23.1% compared to 33.4% in the corresponding quarter of 2018. Jack in the Box has repurchased 3.9 million shares for $340 million in the last four quarters.

Guidance

Jack in the Box’s management has reiterated its fiscal 2019 guidance. For fiscal 2019, management expects its SSSG to be in the range of 0%–2.0%, and it also expects to open 25–35 new restaurants with the majority of them being franchised restaurants. The management also expects its adjusted EBITDA to be between $260 million–$270 million, while its effective tax rate is expected to be between 26%–27% in 2019.

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