On Thursday, Goldman Sachs (NYSE:GS) adjusted its outlook on Jack In The Box (NASDAQ: JACK), reducing the price target to $43.00 from the previous $47.00, while keeping a Sell rating on the stock.
The fast-food chain reported its fourth-quarter earnings for fiscal year 2024, surpassing the consensus estimates of Goldman Sachs and Visible Alpha with earnings of $1.16 per share against the expected $1.04/$1.11.
This beat was primarily attributed to lower general and administrative (G&A) expenses, which helped offset weaker revenue and restaurant-level margins.
Total (EPA:TTEF) revenue for the quarter fell short of expectations, coming in at $349.3 million compared to the Visible Alpha consensus of $356.4 million.
This was due to poorer than anticipated same-store sales growth (SSSG) at both Jack In The Box and Del Taco brands, with Jack In The Box reporting a decline of 2.1% versus the expected decrease of 0.9%, and Del Taco showing a 3.9% drop against the forecast of 4.0% to 3.6%.
The restaurant profit margin stood at 15.1%, which was lower than the Goldman Sachs and Visible Alpha projections of 15.8% and 16.2%, respectively.
Although labor costs were slightly below expectations, this was negated by higher expenses for food and packaging. Excluding the impact of a goodwill impairment, Jack In The Box posted an adjusted EBITDA of $65.7 million.
Despite some positive takeaways from the earnings release and conference call, such as new unit openings and recent franchisee development agreements, the company's fiscal year 2025 earnings per share guidance of $5.05 to $5.45 was significantly below the consensus estimate of $6.23. The guidance reflects ongoing challenges in same-store sales growth and increased G&A expenses partly due to new store openings.
Goldman Sachs acknowledged the potential for a turnaround at Jack In The Box but expressed the need for more definitive signs of improvement in unit growth and SSSG before changing its stance. The firm's updated price target implies a roughly 6% downside from the stock's current level.
In other recent news, Jack in the Box (NASDAQ:JACK) Inc. reported its Q4 and full-year 2024 earnings, indicating strategic progression despite a challenging economic environment.
The company experienced a decrease in same-store sales and consolidated adjusted EBITDA, with same-store sales for Jack in the Box and Del Taco falling by 2.1% and 3.9% respectively, and the adjusted EBITDA declining to $65.5 million. Despite these challenges, the company made significant strides in digital expansion, new market penetration, and restaurant development.
In fact, over 14% of Jack in the Box's sales were digital, and the company expanded into new markets, signing agreements for 464 new restaurants. For fiscal 2025, the company projects an operating EPS between $5.05 and $5.45.
As part of its forward-looking strategy, Jack in the Box plans to focus on digital transformation and operational improvements, expecting 2025 to show significant progress and sustained value for shareholders. However, it's important to note that the company is also facing cost pressures due to California's new minimum wage law and inflation.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Jack In The Box's financial situation, complementing the earnings report and Goldman Sachs' analysis. 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 be attractive 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 strategy aligns with the company's efforts to create shareholder value despite current headwinds. Additionally, Jack In The Box has maintained dividend payments for 11 consecutive years, demonstrating a commitment to returning capital to shareholders even in challenging times.
However, it's important to note that the company operates with a significant debt burden, and short-term obligations exceed liquid assets. This financial structure could explain the pressure on margins and the conservative guidance for fiscal year 2025 mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide deeper insights into Jack In The Box's financial health and future prospects.
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