JACK - Jack in the Box is defended at Guggenheim even as estimates are reeled in

Guggenheim Securities slashed its price target on Jack in the Box ( NASDAQ: JACK ) to reflect lower EPS and EBITDA estimates following the Del Taco acquisition.

Analyst Gregory Francfort and team now see FY22 EPS of $5.90 for the restaurant company vs. $5.89 consensus and FY23 EPS of $6.70 vs. $6.81 consensus. Meanwhile, the forecast for FY22 and FY23 EBITDA increases to $306M and $342M, respectively. The firm's prior price target goes to $85 from $126 off a 10.5X EV/EBITDA multiple to reflect 6.5X on the company operated piece of the business and 11.5X on the franchised side. The lowered multiple takes into account less credit for a potential acceleration in unit growth.

Guggenheim kept a Buy rating on JACK with the new price target still giving the restaurant stock room to run.

Francfort's bull thesis on JACK: "We always knew the store growth would take some time to play out and have been skeptical from the beginning of the potential to hit +4% annual growth (JACK’s 2025 target). But we think JACK management is doing the right things from an operational and franchisee relationship standpoint and if JACK can bend unit growth up to +1-2% over the next 12-18 months and stabilize the margin picture, the stock has by far the most upside potential of our coverage."

Another factor seen working in JACK's favor is that it recently put out pro-forma financials for the Del Taco deal. That is seen helping investors become more comfortable on the earnings trajectory for the business.

Shares of JACK fell 1.37% in mid-day trading on Monday.

Jack in the Box ( JACK ) is lined up to report earnings on August 10. See all the consensus estimates and earnings history.

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