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On Wednesday, KeyBanc Capital Markets maintained a Sector Weight rating on Jack in the Box (NASDAQ:JACK) stock. Analyst Eric Gonzalez provided insights following the company’s first fiscal quarter earnings report, which surpassed expectations with earnings per share (EPS) of $1.92, a slight decline of 2% year-over-year but ahead of the consensus estimate of $1.69. The positive earnings were attributed to higher-than-expected restaurant-level margins at both Jack in the Box and Del Taco brands, driven in part by a new beverage contract. The stock, currently trading at $33.95, has seen significant pressure recently, dropping over 50% in the past year and currently trading near its 52-week low of $32.69. According to InvestingPro analysis, the company appears undervalued based on its Fair Value metrics.
Despite the favorable results for the first quarter, the company anticipates negative trends for both brands in the second fiscal quarter, attributing this to macroeconomic and industry headwinds that are already affecting quarter-to-date performance. The company’s same-store sales (SSS) showed a modest increase of 0.4% in the first quarter, which was slightly above the consensus estimate that predicted flat growth. InvestingPro data reveals that Jack in the Box maintains a notable 5.18% dividend yield and has consistently paid dividends for 11 consecutive years, though it operates with significant debt obligations.
The recent unexpected departure of CEO Darin Harris, announced on Tuesday, has introduced additional uncertainty regarding the company’s near-term direction. However, Gonzalez noted that there could be long-term potential benefits from a reassessment or reset of the brand and company strategy under new leadership.
The analyst expressed that while the valuation of Jack in the Box shares appears inexpensive, trading at less than 7 times the estimated fiscal year 2026 EPS, the stock might stay within a certain range for the time being. This is due to the early stages of transition under new leadership and the current market challenges, which may keep investors cautious.
In other recent news, Jack in the Box reported its first-quarter earnings for fiscal year 2024, revealing an earnings per share (EPS) of $1.92, which surpassed the forecast of $1.73. The company’s revenue for the quarter was $469.4 million, slightly below the anticipated $471.76 million. Despite the revenue miss, the company maintained its annual guidance for same-store sales and operating EPS. In light of recent management changes, including the departure of the CEO and the appointment of a new interim CEO, the company has been focusing on strategic adjustments. Additionally, Citi analysts revised their price target for Jack in the Box, lowering it to $41.00 from $47.00, while maintaining a Neutral rating. The analysts noted the ongoing challenges at Del Taco and a less promising outlook for the second quarter, with negative same-store sales expected for both brands. Jack in the Box continues to invest in digital capabilities and menu optimization as part of its strategic initiatives.
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