Papa John (PZZA) to Report Q2 Earnings: What's in Store?
Papa John's International Inc.PZZA is set to report second-quarter 2016 earnings on Aug 2. Last quarter, the company posted a positive surprise of 9.52%. It managed to beat the Zacks Consensus Estimate in two of the trailing four quarters and matched the same in one quarter. Its average four-quarter positive earnings surprise is 3.55%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Papa John's has been delivering positive comps in both domestic and international markets since the beginning of 2014. The company’s brand revitalization initiatives such as unit expansion, menu innovation and international expansion have contributed significantly to its comps growth.
Meanwhile, the company is investing in technology-driven initiatives like digital ordering in order to capitalize on the digital wave that has hit the U.S. fast casual restaurant sector. These initiatives are expected to positively impact results in the soon-to-be-reported quarter. On the other hand, costs incurred to execute these initiatives are likely to dent profits in the quarter.
Also, like other restaurant companies, rising labor costs, remain a material headwind for the company. Additionally, with many of Papa John’s restaurants located in international markets, the company remains highly vulnerable to fluctuations in exchange rates. Hence, unfavorable foreign exchange translation may hurt sales and profits in the international markets in the to-be-reported quarter.
PAPA JOHNS INTL Price and EPS Surprise
PAPA JOHNS INTL Price and EPS Surprise | PAPA JOHNS INTL Quote
Earnings Whispers
Our proven model does not conclusively show that Papa John’s is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 54 cents. Hence, the company’s Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%.
Zacks Rank: Papa John’s Zacks Rank #2 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about a positive surprise.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are a few companies in the restaurant industry which, as per our model, have the right combination of elements to post an earnings beat this quarter:
Dave & Buster's Entertainment, Inc. PLAY, with an Earnings ESP of +2.27% and a Zacks Rank #1.
Jack in the Box JACK, with an Earnings ESP of +1.15% and a Zacks Rank #2
Shake Shack Inc. SHAK, with an Earnings ESP of +7.69% and a Zacks Rank #3
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PAPA JOHNS INTL (PZZA): Free Stock Analysis Report
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