Jack in the Box (JACK) is scheduled to report its earnings results for the second quarter of 2019 on Wednesday after the market closes. The company is recovering from the impact of refranchising growth after exploring a range of strategic and financing alternatives. This was due to the emphasis on improving operations consistency and targeted investments for maximizing returns.
The second-quarter results will be benefited by its shift to a more value-based approach in the first quarter. It is likely that the future earnings releases would bring more clarity on the approach with comparable sales growth and profitability remaining crucial in winning over the franchise operators.
Jack in the Box will be impacted by an increasing dollar in a stable interest rate environment while the more established players in the industry are less troubled due to their overseas operations. Till the success of the new strategy, traders believed the shares can be put on hold despite the company’s additional debt infusion options and sale process suspension.
Analysts expect the company’s earnings to jump by 17.50% to $0.94 per share and revenue to rise by 3.80% to $217.69 million for the second quarter. In comparison, during the previous year quarter, Jack in the Box posted a profit of $0.80 per share on revenue of $209.77 million.
The company has surprised investors by exceeding analysts’ expectations for twice in the past four quarters. It is expected that Jack in the Box will report upbeat results for the second quarter. Majority of the analysts recommended a “strong buy” or “buy” rating while expecting the stock to reach $91 per share in the next 52 weeks.
For the first quarter, the company reported a 180% jump in earnings helped by lower costs and expenses. However, revenues declined 1.3% year-over-year. Total same-store sales edged down 0.1% during the quarter when a 0.5% increase in company same-store sales was more than offset by a 0.1% decrease in franchise sales. The top-line was negatively impacted by a 40% fall in company restaurant sales.
For fiscal 2019, Jack in the Box expects total same-store sales in the range of flat to up 2%. Capital expenditure is expected to be between $30 million and $35 million. The management plans to open 25-35 new restaurants during the year, the majority of which will be franchise locations.
During early May, the company completed an amendment to its existing senior credit facility. The maturity date for both the revolving credit facility and the term loan was extended from March 2020 to March 2021, resulting in no change to the classification of the company’s long-term debt from prior quarters. The amendment does not impact the prior announced exploration of strategic and financing alternatives.
Shares of Jack in the Box opened lower on Monday and is trading in the red territory. The stock has fallen over 15% in the past year and over 7% in the past three months.