Jack In The Box Down 17% In A Year: What's Hurting The Stock?

Are you still holding shares of Jack in the Box Inc. (NASDAQ:JACK) and waiting for a miracle to take the stock higher in the near term? If yes, then you might end up losing more money as chances of a turnaround appear bleak in the near term. This is quite apparent from the stock’s decline of 17.2% in a year’s time. On the contrary, the Retail-Restaurants industry has increased 9.9% in the same time period. Let’s delve deeper and try to find out the factors behind this Zacks Rank #5 (Strong Sell) company’s dismal performance.

Jack in the Box Vs Industry Scorecard

Lower-Than-Expected Earnings

Jack in the Box reported mixed fourth-quarter fiscal 2018 numbers, wherein earnings missed the Zacks Consensus Estimate but revenues surpassed the same. Adjusted earnings from continuing operations came in at 77 cents per share, which fell short of the consensus mark of 83 cents. Notably, the bottom line lagged estimates in four of the trailing six quarters, the average miss being 1.4%. For the first quarter and fiscal 2019, the consensus mark moved down a respective 8.5% and 8.1% over the past month, reflecting analysts’ concern on the earnings prospects.

Slow Start to the First Quarter

Jack in the Box kick-started first-quarter fiscal 2019 on a disappointing note. Comps for the first seven weeks of the quarter decreased in the range of 1-2% due to the Ribeye Burger’s dismal performance. For fiscal 2019, the company expects comps to be in the range of flat to up 2%.

Stiff Competition

Jack in the Box operates in the retail restaurant space that is highly competitive. American dining brands are keen on expanding in the fast-growing emerging markets. While several other restaurateurs, including Yum! Brands (NYSE:YUM) , McDonald’s (NYSE:MCD) and Domino’s (NYSE:DPZ) , have opened their outlets in the emerging markets; Jack in the Box seems to be lagging on this front. Thus, limited international presence might be a big disadvantage for the company and hurt its competitive position.

Meanwhile, the company has been struggling with wage increases nationwide, which is negatively impacting its operational results. Also, costs related to marketing initiatives, unit expansion and opening catering call centers are expected to keep profits under pressure.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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