Option Trade 
Jack in the Box Inc. (NASDAQ:JACK) Calls 
Tuesday, February 21, 2017

** OPTION TRADE: Buy the JACK MARCH 17 2017 100.000 call at approximately $2.70. Place a pre-determined sell at $5.40.

Note: No protective stop losses added -- but if you wish to do so make it $1.10.

Also Note: This is a recommendation and individual members can use their own discretion as to when to enter or exit!

by Ian Harvey   

Based in San Diego, CA , Jack in the Box Inc. (NASDAQ: JACK), operates and franchises Jack in the Box restaurants, one of the nation’s largest hamburger chains, with more than 2,200 restaurants in 21 states and Guam, and Qdoba Mexican Grill, a fast-casual dining chain, with more than 600 restaurants in 47 states, the District of Columbia and Canada, will release its Q117 earnings data on Wednesday, February 22nd, after the market closes. Analysts expect Jack in the Box to post earnings of $1.25 per share and revenue of $499.40 million for the quarter, which represents a rise of 6.0% from $470.8 million. Revenue growth is expected to be driven by SSSG (same-store sales growth) and unit growth of both Jack in the Box and Qdoba Mexican Eats.

In 4Q16, JACK had better-than-expected earnings. Its initiatives to improve the quality of its menu items and the initial performance of its Brunchfast menu, launched in September 2016, appear to have increased investor confidence. As a result, JACK stock rose.

As of February 16, 2017, JACK stock was trading at $109.13, which represents a rise of 7.5% since the announcement of its fiscal 4Q16 earnings on November 21, 2016.

It was a tough year in 2016 for restaurants due to higher labor wages and the gap between the rising cost of eating out and the falling prices at grocery stores. In spite of these factors, JACK rose 48.7% in 2016.

The company has had a strong performance in the last three quarters. Donald Trump’s presidential victory could also have something to do with JACK’s rising stock price. Investors expect Trump to loosen regulations, which could benefit restaurant chains.

Investment analysts at SunTrust Banks issued their Q1 2018 earnings per share estimates for shares of Jack in the Box in a report released on Friday. SunTrust Banks analyst J. Bartlett forecasts that the firm will post earnings of $1.58 per share for the quarter. SunTrust Banks currently has a “Buy” rating and a $122.00 price target on the stock. SunTrust Banks also issued estimates for Jack in the Box’s Q2 2018 earnings at $1.37 EPS, Q3 2018 earnings at $1.45 EPS and Q4 2018 earnings at $1.37 EPS.

Jack In The Box Inc. has a market capitalization of $3.47 billion, a price-to-earnings ratio of 29.55 and a beta of 0.55. The firm has a 50-day moving average of $108.46 and a 200 day moving average of $102.22. Jack In The Box Inc. has a 12-month low of $61.78 and a 12-month high of $113.30.           

Influencing Factors to Consider               

Jack in the Box's same-store sales have been consistently outperforming the industry over the past several quarters. Particularly, the company's Qdoba brand has been witnessing comps growth on the back of menu innovation. It is expected that the trend will continue in the fiscal first quarter.

Meanwhile, increased marketing and remodeling efforts, along with investments in technology-driven initiatives should drive top-line growth. Moreover, the company is currently focusing deeply on catering sales and its breakfast menu. These are expected to boost its sales in the to-be-reported quarter.

In fact, for the fiscal first quarter, the company expects comps growth at the Jack in the Box restaurants in the range of 2-4% compared with the year-ago comps growth of 1.4%. For the Qdoba restaurants, same-store sales are projected to be flat to up 1% compared with the year-ago quarter comps growth of 1.5%.

In fiscal 1Q17, analysts are expecting JACK to post EPS of $1.24, which represents a rise of 31.7% from $0.94 in fiscal 1Q16. EPS growth is expected to be driven by revenue growth, expansion of EBIT margins, and stock repurchases in the last 12 months.

From the beginning of fiscal 2Q16 to the end of fiscal 4Q16, JACK has repurchased approximately 2.6 million shares worth $192.0 million. By the end of fiscal 4Q16, the company had $408.2 million in its share repurchase program. Share repurchases reduce the number of shares outstanding, thus boosting the company’s EPS.

The company’s management has set an EPS guidance of $4.55–$4.75 for fiscal 2017. Analysts are expecting the company to post EPS of $4.70, which is a rise of 19.4% from $3.94 in fiscal 2016. EPS growth is expected to be driven by revenue growth, expansion of margins, and share repurchases in the last 12 months.

In fiscal 1Q17, SG&A expenses are expected to fall from 14.0% to 11.8% due to the consolidation of its information and technological systems. Analysts are also expecting D&A expenses to fall from 6.1% to 5.8% of its total revenue.

Analysts are expecting JACK to post an EBIT margin of 17.0% in fiscal 2017 compared to 14.9% in fiscal 2016. The refranchising of 70 restaurants and lower commodity and SG&A expenses are expected to expand JACK’s margins in fiscal 2017.

Analysts and Hedge Funds Opinions

Victory Capital Management Inc. boosted its position in shares of Jack in the Box by 58,757.7% in the third quarter. Victory Capital Management Inc. now owns 620,949 shares of the company’s stock valued at $59,573,000 after buying an additional 619,894 shares during the last quarter.

Robert W. Baird reiterated an “outperform” rating on shares of Jack in the Box in a research note last Thursday.

A number of other brokerages also recently weighed in on the stock…..

  • SunTrust Banks, Inc. upgraded shares of Jack in the Box from a “neutral” rating to a “buy” rating and raised their price objective for the company from $102.00 to $122.00 in a research note on Friday, February 10th.
  • Jefferies Group LLC reiterated a “buy” rating on shares of Jack in the Box in a research note on Friday, January 6th.
  • Telsey Advisory Group raised their price objective on shares of Jack in the Box from $120.00 to $125.00 and gave the company an “outperform” rating in a research note on Friday, January 6th.
  • Finally, Oppenheimer Holdings, Inc. reiterated an “outperform” rating on shares of Jack in the Box in a research note on Tuesday, December 20th.

Two analysts have rated the stock with a sell rating, four have issued a hold rating and eleven have assigned a buy rating to the stock. The company presently has an average rating of “Buy” and a consensus price target of $125.23.

 Harvey’s Options Volatility Indicator

Conclusion

Expect the company to surpass expectations.

Last quarter, Jack in the Box posted a positive earnings surprise of 17.05%. In fact, the company surpassed earnings estimates in three of the past four quarters, with an average beat of 12.94%.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

** OPTION TRADE: Buy the JACK MARCH 17 2017 100.000 call at approximately $2.70. Place a pre-determined sell at $5.40.

Note: No protective stop losses added -- but if you wish to do so make it $1.10.

 ”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!

Options traders are not successful because they win.

Options traders win because they are successful.

Back to Stock Options Made Easy Home Page

Back to Option Trades from Option Trade – Jack in the Box Inc. (NASDAQ:JACK) Calls - Tuesday, February 21, 2017



Get all the latest options news from
STOCK OPTIONS MADE EASY with our FREE newsletter


Enter Your Email Address

Enter Your First Name









Search Stock Options
Made Easy



Enjoy Relaxed or Fast-Paced Trading? Choose your Membership Style...

Whether you prefer to take a laid-back approach to your trading,

or to charge ahead in your options trading,

 Stock Options Made Easy Armchair Trader and Cut-to-the-Chase Trader Memberships put everything you need to succeed at your fingertips for just  $39 or $79 per month.






Subscribe to our FREE
newsletter for all the latest options news!


Enter Your Email Address

Enter Your First Name











Follow S_O_M_E on Twitter