TACO - Jack in the Box is expected to see some EPS accretion benefits from Del Taco deal

Cowen says it has mixed emotions on the big M&A move by Jack in the Box (JACK -3.4%) to acquire Del Taco Restaurants (TACO +65.9%). Analyst Andrew Charles: "We would have preferred to see the company lever up to buyback stock and invest behind targets to reach 4% net restaurant development by 2025, and keep management's attention singularly focused on the Jack brand. However, we are keeping an open mind given expectations for mid-single digit EPS accretion in fiscal 2022, and a stronger degree of EPS accretion in fiscal 2023." The Del Taco acquisition is seen posing some distraction risk as the Jack brand builds toward 4% net restaurant growth in 2025, but Charles highlights the immediate MSD accretion to the company's 2022 EPS and $15M of targeted synergies that strikes the firm as low at first look. Cowen keeps an Outperform rating on JACK and price target of $130.

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Jack in the Box is expected to see some EPS accretion benefits from Del Taco deal