Jack In The Box Makes Good On Promise To Return Cash To Shareholders

On September 22, Jack in the Box Inc. JACK announced an increase in the size of its credit facility, while also raising its maximum leverage ratio and share buyback authorization.

Baird’s David E. Tarantino maintains an Outperform rating on the company, with a price target of $120.

Credit Facility Raised

“These actions are consistent with JACK's previously communicated plan to increase financial leverage in order to return cash to shareholders via buybacks, which we view positively,” Tarantino mentioned.

The company announced that it was raising its existing credit facility capacity from $1.2 billion to $1.6 billion, which leads to an increase in maximum debt/EBITDA ratio from 3.5X to 4.0X.

The revolver of the amended credit facility remained unchanged at $900 million, while the term loan rose from $300 million to $700 million, raising the company’s borrowing capacity by $400 million.

Share Buyback Authorization

“The board approved a new $300 million buyback authorization (expires in November 2018), which is incremental to the $150 million remaining on the existing program (expires in November 2017) as of the end of FQ3-16,” the analyst stated.

Jack in the Box had earlier indicated that future share buybacks were likely to be done through a steady 10b5-1 plan.

“The announcements are consistent with JACK's plans to add financial leverage in order to return more capital to shareholders. We continue to view JACK's overall strategy positively,” Tarantino added.

Full ratings data available on Benzinga Pro.