Merrill Lynch analyst Joseph Buckley weighed in on Jack in the Box Inc. (NASDAQ:JACK), after the fast-food company reported stronger than expected fiscal second-quarter operating EPS of $0.85, exceeding Buckley’s $0.69 estimate. The analyst reiterated a Buy rating and $90 price target on the stock.
Buckley wrote, “The upside was primarily driven by restaurant level margins that were down year over year but were much better than expected. Margins on franchise revenues were also higher than expected reflecting higher net rental income of $1.9mn tied to improved sales in the refranchised Southeast markets. In addition, a lower than expected tax rate added a penny to EPS and a lower share count from more aggressive share repurchases added $0.02 versus our model. There was a $0.04 EPS benefit from favorable pension plan mark-to-market adjustments which is a regular albeit unpredictable quarterly factor for JACK.”
“JACK maintained full year EPS guidance of $3.50-$3.63 despite lower sales guidance for both brands. We were expecting EPS guidance to be lowered given recently slower industry sales […] The only changes to full year guidance were for slower sales at both brands. This is being offset by more aggressive share repurchases with 2.18 million shares (6% of the total shares) repurchased in 2Q for $150mn or $68.90 per share,” the analyst added.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Joseph Buckley has a yearly average return of 3.4% and a 62.5% success rate. Buckley has a average return when recommending JACK, and is ranked #1125 out of 3913 analysts.
Out of the 9 analysts polled by TipRanks, 8 rate Jack In The Box stock a Buy, while 1 rates the stock a Hold. With a return potential of 14.5%, the stock’s consensus target price stands at $85.88.