It’s A New Day For Jack In The Box, Inc
Jack In The Box (NASDAQ:JACK) is fast becoming a force to be reckoned with in the fast-food wars. Long a stagnant brand, the new CEO Darrin Harris is bringing new life to the company. The timing of his entrance was perfect, under his leadership the company has been able to ride the tidal wave of pandemically inspired trends to new growth. Now, with the stock in an obvious uptrend, the question of where do share prices go now arises. In our view, this company is an undervalued gem that income investors with a hankering for fast-food need to have in their portfolio.
Jack In The Box Is Ready To Grow
Jack In The Box had a great quarter for the fiscal Q1/calendar Q4 period. The company posted $338.54 million in net consolidated revenue making the fourth quarter of revenue acceleration and to a level of YOY growth. More importantly, the 10% comp is versus the prepandemic level which was itself the highest revenue posted in over two years. So, the 16 basis point beat isn’t much to brag about but everything else about the results is more than good. And that’s with five fewer locations than a quarter ago.
At the comp level, Jack System comps rose by 12.5% on a 21% increase in check average offset by a 13.7% decrease in ticket count. Company-owned sales lagged at 7.5% with franchisees up a solid 13% for the quarter. Margins also improved across the system, up 70 basis points YOY, on a variety of factors. Cost savings in food and packing were augmented by menu price increases and a mix-shift but offset by higher commodity costs and labor. On the bottom line, GAAP and adjusted earnings both grew from the prior year and beat the consensus. The GAAP $2.21 beat by $0.45 while adjusted $2.16 beat by $0.39.
The company did not give any formal guidance but did give a favorable outlook. According to CFO Tim Mullany trends witnessed in the Q1 period have continued into the 2nd quarter. This, along with the substantial beat in Q1, put the company well on track to beat the full-year consensus so we do expect to hear positive analysts chatter in the days and weeks ahead.
Jack In The Box Is A Good Dividend Payer, Too
Jack In The Box has more to offer than just the growth story, there is a dividend to consider as well. The company pays out $1.60 annually which works out to about 28% of a consensus figure we now know to be incredibly cautious. Add to that a fairly sound balance sheet and the payout looks safe enough if not on the verge of an increase. Jack In The Box hasn’t made an increase in over four years but has only ever increased in its distribution history. With revenue, earnings, cash-flow, and FCF on the rise (as well as a new CEO committed to enhancing shareholder value) it is our opinion that Jack In The Box has a high probability of increasing its payout within the next year or so.
In terms of value, the Jack In The Box 1.6% yield will cost you about 15X to 16X earnings compared to 20X to 32X earnings for other established fast-food brands and much higher valuations for growth names like Chipotle Mexican Grill and Shake Shack.
The Technical Outlook: Jack In The Box Confirms Support
Shares of Jack In The Box are in a clear uptrend and showing a very strong confirmation of that trend. The post-release price action sent shares down to test support at the short-term moving average and it was confirmed with a Doji candle. Now, with shares rising in the premarket action, it looks like a rally is about to spring forth. There is resistance at the $103.50 level but it shouldn’t hold price action back for long. Once it is broken this stock should move up to retest the all-time highs near $110 and then move up to set fresh new highs driven by growth and multiple-expansion.
Before you consider Jack in the Box, you'll want to hear this.
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