RBC cuts Jack In The Box target to $65 from $70, keeps Outperform

On Thursday, RBC Capital Markets adjusted its outlook on Jack In The Box (NASDAQ: NASDAQ:JACK), reducing the price target from $70.00 to $65.00, while maintaining an Outperform rating on the stock. The firm's decision follows Jack In The Box's fourth-quarter 2025 earnings report and initial financial guidance for fiscal year 2025, which did not meet expectations.

Despite the lower-than-anticipated financial results, RBC Capital sees a favorable risk/reward balance for the fast-food chain, noting the stock is trading near its post-COVID lows. The analyst expressed optimism about the company's comparable sales (comps) guidance, observing that Jack In The Box is performing towards the higher end of its quarter-to-date projections.

The analyst also highlighted several positive factors for Jack In The Box, including the continued strong performance in new markets, an expanding development pipeline, and stable franchisee profitability. These elements are expected to support an acceleration in unit growth as the company's revenue returns to growth.

Conversely, concerns were raised regarding the expected limitation on top-line growth in the coming year. Additionally, the impact of increased wages in California is anticipated to continue affecting restaurant-level margins (RLMs). In light of these factors, the analyst has revised estimates and the price target downward but reaffirmed the Outperform rating, signaling a continued positive outlook on the stock's potential.

In other recent news, Jack In The Box reported its fourth-quarter earnings for fiscal year 2024, surpassing consensus estimates with earnings of $1.16 per share. However, total revenue for the quarter fell short of expectations, coming in at $349.3 million. The company attributed this shortfall to weaker same-store sales growth at both Jack In The Box and Del Taco brands. Despite lower general and administrative expenses, the restaurant profit margin stood at 15.1%, lower than the projections made by Goldman Sachs and Visible Alpha.

Goldman Sachs has adjusted its outlook on Jack In The Box, reducing the price target to $43.00 from $47.00, while maintaining a Sell rating on the stock. The firm acknowledges the potential for a turnaround but requires more definitive signs of unit growth and same-store sales growth improvement before changing its stance.

Facing a challenging economic environment, Jack In The Box made strides in digital expansion, new market penetration, and restaurant development. Over 14% of the company's sales were digital, and agreements were signed for 464 new restaurants. For fiscal 2025, the company projects an operating EPS between $5.05 and $5.45, reflecting ongoing challenges in same-store sales growth and increased expenses due to new store openings.

InvestingPro Insights

To complement RBC Capital's analysis, recent data from InvestingPro offers additional context on Jack In The Box's financial position. The company's market capitalization stands at $872.14 million, reflecting its current market valuation. Despite the challenges highlighted in the earnings report, Jack In The Box maintains a dividend yield of 3.86%, which may appeal to income-focused investors.

InvestingPro Tips reveal that management has been aggressively buying back shares, potentially signaling confidence in the company's long-term prospects. This aligns with RBC Capital's view of a favorable risk/reward balance. Additionally, Jack In The Box has maintained dividend payments for 11 consecutive years, demonstrating a commitment to shareholder returns despite recent headwinds.

However, it's worth noting that the company operates with a significant debt burden, which could impact financial flexibility as it navigates the challenges outlined in the article. This factor, combined with the analyst's concerns about top-line growth limitations and margin pressures, underscores the complexity of Jack In The Box's current financial situation.

For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide further insights into Jack In The Box's investment potential.

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