On Friday, Oppenheimer made an adjustment to its financial outlook for Jack In The Box (NASDAQ: JACK), reducing the price target to $60 from the previous $70 while maintaining an Outperform rating on the stock.
The revision comes ahead of the company's fourth-quarter earnings report scheduled for November 20, 2024, during which the management is expected to present financial guidance for 2025.
The analyst at Oppenheimer revised the 2025 forecasts to reflect an EBITDA prediction of $306 million, which falls short of the consensus estimates of $318 million by the Street. This adjustment was made following a refreshed analysis of the company's financials. The report indicates that the new target is based on an enterprise value to EBITDA (EV/EBITDA) multiple of 8.5 times, which is at the lower end of the spectrum within Oppenheimer's coverage.
Despite the reduction in the price target, Oppenheimer's stance on Jack In The Box remains positive with an Outperform rating. However, the firm notes that the stock's valuation is unlikely to be deemed overly attractive to investors until the company can demonstrate a pattern of setting conservative expectations and then exceeding them. Currently, the firm expresses limited visibility into such a dynamic for Jack In The Box.
The analyst's commentary pointed out that the revised model will be further discussed during the upcoming earnings call, providing investors with insights into the factors driving the estimates below the Street's forecasts. The report concludes with the adjusted price target of $60, reflecting the new expectations and the current market valuation of Jack In The Box.
In other recent news, Jack in the Box (NASDAQ:JACK) experienced a decrease in same-store sales for the fourth fiscal quarter, according to an analysis by Loop Capital. The firm's discussions with U.S. franchisees revealed a shift from flat sales to a 0.5% decline during the initial seven weeks of the quarter, which further declined to between 1.0% and 1.5% over the concluding weeks.
Despite this, the company announced a new franchise agreement to open 12 new locations in the Chicago area. Jack in The Box also saw a transition in its financial leadership, with the departure of CFO Brian Scott and the appointment of Dawn Hooper as interim CFO.
Analyst firm TD Cowen revised its outlook on Jack in the Box's shares, lowering the price target to $57 from $59, while maintaining a Hold rating. For the full year, the company expects an adjusted EBITDA between $320 million and $325 million, with operating EPS of $6.10 to $6.25. In addition, Del Taco, owned by Jack in the Box, opened a new restaurant in Kissimmee, Florida, featuring a collaboration with actor Danny Trejo's Trejo's Tacos.
InvestingPro Insights
To complement Oppenheimer's analysis, recent data from InvestingPro sheds additional light on Jack In The Box's financial situation. The company's market capitalization stands at $887.64 million, with a price-to-earnings (P/E) ratio of 9.82 based on the last twelve months as of Q3 2024. This relatively low P/E ratio could indicate that the stock is undervalued, aligning with Oppenheimer's Outperform rating despite the lowered price target.
InvestingPro Tips highlight that Jack In The Box operates with a significant debt burden, which may be contributing to the analyst's cautious outlook. Additionally, the company's stock price movements are noted to be quite volatile, which could explain the need for consistent performance to attract investors, as mentioned in the Oppenheimer report.
On a positive note, management has been aggressively buying back shares, which could signal confidence in the company's future prospects. Moreover, Jack In The Box has maintained dividend payments for 11 consecutive years, with a current dividend yield of 3.79%. This consistent dividend policy may provide some stability for investors amid the volatility.
It's worth noting that InvestingPro offers 8 additional tips for Jack In The Box, providing investors with a more comprehensive analysis of the company's financial health and market position.
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