Jack In The Box (JACK) Surges 27% Post-Earnings: What's Really Driving The Rally?

A month has passed since Jack In The Box released its fiscal fourth quarter results, and the stock has climbed roughly 27% during this period, significantly outpacing the broader market. But beneath the surface gains lies a concerning story that raises a critical question: Is this momentum sustainable, or are investors ignoring warning signs?

The Numbers Don’t Tell a Pretty Story

When Jack In The Box (JACK) announced its Q4 fiscal 2025 performance, the market received decidedly mixed signals. While the company managed to beat on revenues—posting $326.2 million against the expected $321 million—the earnings miss was far more damaging. Adjusted EPS clocked in at just 30 cents, dramatically undershooting the consensus estimate of 46 cents and cratering 74.1% year-over-year from $1.16 per share.

The revenue beat hardly tells a victory story either. Total revenues actually fell 6.6% from the prior year, dragged down by lower sales volumes across both brands and the strategic Del Taco refranchising transactions. Breaking down the revenue components reveals the underlying weakness:

• Franchise rental revenues tumbled 7.6% year-over-year to $80.7 million
• Royalties and other revenues declined 4.4% to $52.1 million
• Advertising contributions dropped 9.3% to $50.9 million
• Company restaurant sales contracted to $142.5 million from $151.4 million in the year-ago quarter

Where The Real Pain Shows: Same-Store Sales Deterioration

The most telling metric—same-store sales—reveals a business under pressure. Jack In The Box’s company-owned locations saw same-store sales plummet 5.3%, a significant worsening from the prior year’s 2.2% decline. Franchised locations performed even worse, with same-store sales dropping 7.6% versus last year’s 2% decrease. Systemwide, the company faced a 7.4% same-store sales decline compared to a 2.1% drop a year earlier.

Del Taco, the company’s secondary brand, wasn’t immune to the headwinds. Company-owned same-store sales fell 3.1% year-over-year, with franchise locations declining 4.2% and system-operated stores dropping 3.9%.

Margin Compression Signals Operational Stress

Beyond the sales weakness, operational metrics deteriorated notably. The total restaurant-level adjusted margin contracted to 16.1% from 18.5% in the prior-year quarter. Franchise-level margins also compressed, falling to 38.9% from 40.4% year-over-year. Perhaps more concerning, SG&A expenses surged to 11.2% of total revenues compared with just 8.6% previously, indicating the company is spending more just to maintain current operations.

The Balance Sheet Offers Limited Comfort

On the positive side, Jack In The Box bolstered its cash position to $51.5 million from $24.7 million a year prior. However, the company’s long-term debt burden remains hefty at $1.67 billion. Most notably, management discontinued its dividend and executed minimal share buybacks—repurchasing only 0.1 million shares for $5 million during the full year 2025. With $175 million still available under its buyback authorization, the company’s restraint suggests confidence may be waning.

Fiscal 2026 Guidance: Cautious at Best

Looking ahead, management’s fiscal 2026 outlook provides limited enthusiasm. The company projects:

• Adjusted EBITDA in the $225-$240 million range
• Jack In The Box same-store sales expected to be flat to up just 1%
• Restaurant-level margins anticipated at 17-18%
• Franchise-level margins projected at $275-$290 million
• Capital expenditures estimated at $45-$50 million

These forward-looking statements essentially signal that management expects the business to grind sideways at best in the coming year.

The Estimate Revision Story Investors Are Missing

Here’s where the 27% rally becomes puzzling: over the past month, consensus estimates have actually shifted -27.19%—meaning analysts have been reducing their expectations, not raising them. This negative revision trend contradicts the stock’s positive price action, suggesting investors may be getting ahead of themselves or responding to other market-specific factors unrelated to fundamentals.

Investment Scorecard Reveals Deep Concerns

Jack In The Box’s current valuation scorecard tells an interesting story. The stock carries a disappointing F rating on Growth and a weak D on Momentum. However, it does score an A on Value metrics, which explains some of the recent buying interest from value-oriented investors. But the aggregate VGM Score lands at D, hardly an endorsement for investors without a specific strategy in focus.

The real kicker: Zacks has assigned the stock a #5 ranking (Strong Sell), expecting below-average returns over the next several months.

How Does It Stack Against McDonald’s (MCD)?

For perspective, consider how Jack In The Box compares to McDonald’s (MCD), a direct peer in the restaurant retail sector. Over the past month, McDonald’s gained 5.1%—far less than JACK’s 27% move. McDonald’s posted revenues of $7.08 billion in its last quarter, representing 3% year-over-year growth, compared to JACK’s 6.6% revenue decline.

McDonald’s delivered EPS of $3.22 versus $3.23 a year ago, essentially flat performance. More importantly, analysts project McDonald’s to earn $3.00 per share next quarter, representing 6% year-over-year growth. The consensus estimate for McDonald’s has shifted only -0.4% over the past 30 days, far more stable than JACK’s steep -27.19% revision. McDonald’s carries a Zacks Rank of #3 (Hold), a notably more bullish stance than JACK’s Strong Sell rating.

The Bottom Line: Rally May Be Ahead of Reality

Jack In The Box’s 27% run-up since earnings appears premature given the fundamental deterioration evident in the company’s latest quarter. Mixed earnings results, weakening same-store sales trends, margin compression, and negative estimate revisions paint a picture of a struggling business, not one worthy of such aggressive buying. While the stock trades at attractive valuations on a purely price-to-earnings basis, value investors should remember that cheap stocks often get cheaper for a reason.

The momentum appears to be fading into a headwind of disappointing fundamentals. Whether the rally persists into the next earnings cycle or reverses course may depend on whether management can stabilize same-store sales trends and restore margin expansion—outcomes that remain highly uncertain based on current guidance.