California-based Jack In The Box (JACK) is a fast-food restaurant chain. It operates more than 2,200 locations across 21 states and Guam.
In December, Jack announced a deal to acquire Del Taco Restaurants (TACO) for $575 million. Del Taco operates 600 restaurants in 16 states. The deal includes Jack assuming Del Taco’s existing debt. The combined company would have a network of more than 2,800 restaurants across 25 states. The transaction is expected to close in Q1 2022.
Jack’s earnings report shows revenue rose 9% year-over-year to $278.5 million in Fiscal Q4 2021 ended October 3 but fell short of the consensus estimate of $289.1 million. The company posted EPS of $1.80 versus $1.64 in the same quarter last year and beat the consensus estimate of $1.75.
Jack ended Q4 with $73.6 million in cash. The company recently distributed a quarterly dividend of $0.44 per share. Jack’s stock currently offers a dividend yield of 1.96%, compared to the sector average of 0.45%.
With this in mind, we used TipRanks to take a look at the risk factors for Jack In The Box.
Risk Factors
According to the new TipRanks Risk Factors tool, Jack In The Box’s main risk categories are Legal & Regulatory and Production, each representing 23% of the total 35 risks identified for the stock. Ability to Sell and Finance & Corporate are the next two major risk categories at 20% and 14% of the total risks, respectively. Jack recently added one new Legal and Regulatory risk factor.
The company informs investors that its income is subject to taxation at federal, state, and local levels. It cautions that significant changes in tax laws, such as an increase in tax rates, could adversely affect its operating results and financial condition.
In an updated Macro and Political risk factor, Jack tells investors that the federal government’s COVID-19 vaccine mandate may adversely impact its operating results. It mentions that it could lose some of its employees due to the vaccine requirement. Further, the company mentions that it may incur additional costs for testing because of the mandate.
The Legal & Regulatory risk factor’s sector average is 19%, versus Jack’s 23%. Jack’s stock has declined 3.8% over the past year.
Analysts’ Take
In December, Jefferies analyst Andy Barish reiterated a Hold rating on Jack In The Box stock and lowered the price target to $90 from $105. Barish’s reduced price target suggests 2.59% upside potential.
Consensus among analysts is a Moderate Buy based on 7 Buys, 7 Holds, and 1 Sell. The average Jack In The Box price target of $109.38 implies 24.68% upside potential to current levels.
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