Papa John's (PZZA) Down 5.9% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Papa John's International, Inc. PZZA. Shares have lost about 5.9% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Papa John's Q4 Earnings Top, Revenues Lag
Papa John’s reported mixed fourth-quarter 2016 results wherein earnings beat the Zacks Consensus Estimate while revenues lagged the same.
Earnings and Revenue Discussion
Adjusted earnings of $0.69 per share beat the Zacks Consensus Estimate of $0.66 by 4.5%. Moreover, earnings increased 11.3% year over year owing to higher revenues.
Revenues of $439.6 million failed to surpass the consensus mark of $445.8 million by 1.4%. However, revenues increased 5.5% year over year. The upside reflects higher domestic company-owned restaurant sales, increase in North America franchise royalties and fees, improved North America commissary and other sales along with higher international revenues.
Behind the Headline Numbers
Global restaurant sales growth of 5.3% in the fourth quarter was better than the year-ago quarter’s growth of 3.4%, but lower than 7.6% in the prior quarter.
Excluding foreign currency impact, global restaurant sales growth was 7%, which was also better than the year-ago comps rise of 5.7%, but lower than the prior-quarter growth of 8.9%.
Domestic company-owned restaurant sales were up 7.2%, primarily due to a 3.2% increase in equivalent units and a 4.8% rise in comparable sales. North America franchise royalties and fees were up 6.3% driven by a 3.4% rise in comparable sales and reduced levels of royalty incentives in 2016. North America commissary and other sales were up 2.9% on the back of higher commissary sales.
Comps at system-wide North American restaurants were up 3.8%, higher than 1.9% comps growth in the year-ago quarter, but lower than the 5.5% growth last quarter.
International revenues were up 8.9% year over year primarily due to higher royalties and commissary sales, somewhat offset by lower company-owned restaurant sales in China. Currency affected international revenues by $4.5 million. Comps at system-wide international restaurants increased 5.6%, better than comps growth of 5.3% a year ago but weaker than 7.6% growth in the preceding quarter.
2016 Results
Papa John’s full-year adjusted earnings of $2.55 topped the Zacks Consensus Estimate of $2.53 by 0.8%. Moreover, it increased 22% from the year-ago quarter figure of $2.09 on the back of higher revenues.
Full-year revenues of $1.71 billion slightly missed the Zacks Consensus Estimate of $1.72 billion, but increased 4.7% year over year.
Guidance for 2017
For 2017, Papa John’s expects adjusted earnings per share to grow in the range of 8% to 12%.
North America system-wide comps are projected to rise in the band of 2% to 4%. Meanwhile, international comps are expected to be up in a range of 4% to 6% in 2017.
Capital expenditures are expected to range between $45 and $55 million.
The company expects net global new unit to grow in the range of 4–5%, with majority of the growth coming in the second half of year.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
Papa John's International, Inc. Price and Consensus
Papa John's International, Inc. Price and Consensus | Papa John's International, Inc. Quote
VGM Scores
At this time, Papa John's stock has a great Growth Score of 'A', though it is lagging a lot on the momentum front with a 'F'. Following a similar course, the stock was allocated also a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for growth based on our styles scores.
Outlook
The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
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