Consensus EPS Of Jack In The Box Has Upside Revision Potential

Wedbush reiterated its Outperform rating and $115 price target on Jack in the Box Inc. (NASDAQ: JACK) shares, as its checks show solid comps in the fourth quarter and should pave way for potential upside EPS revisions.

The company expects same-store sales increase of about 1.0 to 2.0 percent at Jack in the Box company restaurants versus a 4.1 percent increase in the year-ago quarter.

The brokerage's point to SSS growth is approximately in line with 1.5 percent consensus in the fourth quarter and is driven by new products, despite intense competition and weakness in Texas persisting.

Meanwhile, analyst Nick Setyan believes the company's FY17 comp expectations may prove conservative given expectations for at least 2 percent menu pricing and easy FY17 comparisons.

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"Each 1 percent incremental comp equates to ~$0.10 in incremental EPS. FY17 JIB co-owned consensus is for 2.4 percent. We expect FY17 comp guidance at least in line with consensus," Setyan wrote in a note.

Meanwhile, the analyst expects conservative FY17 EPS guidance from the company and believes FY17 consensus EPS is poised for upward revisions even with conservative guidance.

Further, Setyan expects the company to accelerate repurchases, driven by the recent credit amendment and FY17 could mark inflection point in Qdoba restaurants.

"Continue to believe drivers of SSS growth ahead of reset expectations at both brands exist, and combined with multiple cost levers and share buybacks, are poised to drive upside to current EPS expectations," Setyan added.

Shares of Jack in the Box closed Thursday's trading at $93.81, while the analyst's $115 target implies potential upside of 22.6 percent.

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