Jack in the Box, Inc. (JACK, Financial) will release its second quarter 2014 earnings after the bell on Wednesday, May 14, 2014. A conference call to discuss the earnings report is scheduled at 8:30 am, PST, on the company’s website at http://investors.jackinthebox.com. Jack in the Box is a fast food restaurant based in San Diego, California. The company currently operates approximately 2,500 restaurants spread over 21 states.
Analysts Expect:
- EPS ranging from $0.50 to $0.53 with a target of $0.52
- Revenue ranging from $327 million to $347 million with a target of $338 million
Revenue/EPS Recap
For Q1 2014, Jack in the Box operating income increased 23% compared to the first quarter 2013. In addition to its fast food restaurants, the company currently operates 620 Qdoba Mexican Grill restaurants in the West and Southwest. Jack in the Box is revamping its menu and adding new items such as Munchie Meals to attract new business. The restaurants are bringing in additional customers by staying open later. As a result, first quarter 2014 revenue increased 25% over fourth quarter 2013 revenue.
In the upcoming quarters, California’s minimum wage hike along with increased commodity prices will negatively affect Jack in the Box revenues. On July 1, 2014, California’s minimum wage increases from $8.00 to $9.00 an hour. The portion of each employee’s Social Security and Medicare taxes the company must pay will increase as well.
| Revenue | Q1 2014 | Q4 2013 | Q3 2013 | Q2 2013 |
| Estimate | $436M | $336M | $363M | $359M |
| Actual | $450M | $338M | $350M | $356M |
| Difference | +14M | +2M | -13M | -3M |
Jack in the Box has beat analyst EPS expectations for the past five quarters. However, rising commodity food prices will put pressure on the company’s future earnings. During the first quarter 2014 conference call, company guidance projected that the cost of beef will increase 2 -3% over the upcoming quarters. However, the company has locked in prices for its bread and chicken needs so any price increase in those commodities will not impact upcoming earnings. To counteract the effects of higher wages and commodity prices, Jack in the Box has significantly cut its packaging and overall food costs.
| EPS | Q1 2014 | Q4 2013 | Q3 2013 | Q2 2013 |
| Estimate | $0.66 | $0.39 | $0.38 | $0.31 |
| Actual | $0.75 | $0.45 | $0.41 | $0.33 |
| Difference | +0.09 | +0.06 | +0.03 | +0.02 |
Competitors
Jack in the Box’s primary competitors are McDonald’s (MCD, Financial), Burger King Worldwide (BKW, Financial) and Yum! Brands (YUM, Financial). To differentiate their products from McDonald’s and Burger King, Jack in the Box offers food with a Southwestern flair including tacos and stuffed Jalapenos. Qdoba Mexican Grill is designed to compete with YUM!’s Taco Bell, Kentucky Fried Chicken, Pizza Hut and Wing Street. Jack in the Box should grab more of the fast food market share as the company continues opening restaurants in new areas.
| Revenue | JACK | MCD | BKW | YUM! |
| Price | $53.99 | $102.42 | $25.26 | $75.68 |
| Market Cap | $2.26B | $101.40B | $8.92B | $33.43B |
| Revenue (TTM) | $1.49B | $28.20B | $1.06B | $13.27B |
| Net Income (TTM) | $89.51M | $5.52B | $258M | $1.15B |
| Qtr. Rev. Growth | -0.01 | +0.01 | -0.27 | +0.08 |
| EPS (TTM) | $1.40 | $5.50 | $0.72 | $2.51 |
Technical Considerations
Analysts are very bullish on Jack in the Box. Of the 14 firms covering the company, 9 rate the stock as a buy while the remaining 5 rate the stock as hold. The stock started an uptrend on Nov. 14, 2013, when it gapped up and hit $40.67. The uptrend continued until Mar. 18, 2014, when it hit a high of $62.90. Since then, the stock has dropped to $52.41 on Apr. 30, 2014. The stock price currently finds support at $52.00 and resistance at $56.00. The stock could resume its upward trend if Jack in the Box exceeds the earnings estimates for the sixth straight quarter in a row.
