Jack In The Box's 4Q To Be Impacted By Slowing Comp, Analyst Cuts Price Target

Stifel analyst Chris O'Cull reiterated a Hold rating on Jack In The Box Inc. JACK, lowering the price target to $88 from $98.

The company recently reported street-beating performance in Q3, with same-store sales rising 7.9%, franchise same-store sales up 8%, and company-operated same-store sales up 6.9%.

The analyst thinks higher system SRS drove the results, improving restaurant margin performance and tightly controlled G&A expenses.

However, uncertainty about 4Q prevails, given the wide range implied by the full-year guidance, the likelihood of slowing comp performance, and the impact of refranchising, mentions the analyst.

The company declined to comment on the outlook for FY24 refranchising targets, indicating it would provide an update with FY24 guidance in Q4.

Management highlighted headwinds to the comp in Q4, particularly the roll-off of 400 bps of pricing from the prior year and lapping the first quarter in which expanding operating hours were a meaningful contributor to comp performance, O'Cull adds.

The analyst believes the company stores vastly expanded operating hours, so the gap between company and franchise comp performance will persist in Q4. 

JACK indicated that JIB would have less pricing in Q4 and be lapping benefits from expanded operating hours.

Overall, the analyst believes JIB's comp performance will be the critical factor for the stock price until unit growth accelerates meaningfully. 

However, given menu prices are moderate, O'Cull expects the comp performance to moderate.

The analyst lowered FY23 revenue guidance from $1.71 billion to $1.70 billion, reiterating the EPS estimate at $6.1.

The analyst lowered FY24 revenue guidance from $1.68 billion to $1.61 billion, reducing the EPS estimate from $7.3 to $6.9.

Price Action: JACK shares are trading lower by 1.85% to $84.04 on the last check Monday.