Papa John's (PZZA) Q2 Earnings, Sales Top; Comps Rise
Papa John’s International, Inc. PZZA reported upbeat second-quarter 2016 results, wherein both earnings and revenues beat the Zacks Consensus Estimate. Also, the pizza delivery chain raised its earnings guidance for 2016.
Adjusted earnings of 61 cents per share beat the Zacks Consensus Estimate of 54 cents by 13%. Moreover, earnings increased nearly 30% year over year owing to higher revenues.
Revenues of $423 million exceeded the consensus mark of $416 million by 1.7%. Also, it increased 6% year over year. The upside reflects higher international sales and better comps than the preceding quarter.
PAPA JOHNS INTL Price and Consensus
PAPA JOHNS INTL Price and Consensus | PAPA JOHNS INTL Quote
Behind the Headline Numbers
Global restaurant sales growth in the second quarter was 5.9% that compared unfavorably with the year-ago growth of 6.4% but was better than 2.3% growth in the prior quarter.
Excluding foreign currency impact, global restaurant sales growth was 7.7% that also compared unfavorably with the year-ago comps growth of 8.8% but favorably with the prior quarter comps growth of 4.2%.
Domestic company-owned restaurant sales were up 9.8%, primarily due to a 5.1% increase in equivalent units and a 5.6% rise in comparable sales. Domestic franchise royalties and fees were up 8.7% driven by a 4.5% rise in comp sales and reduced levels of royalty incentives in 2016. Domestic commissary and other sales were up 0.9%. The upside was driven by higher commissary sales, partially offset by lower pricing for certain commodities and higher online fee revenues for the online and mobile ordering business. These increases were partially offset by the prior year inclusion of approximately $1.3 million of FOCUS equipment sales to franchisees.
Comps at system-wide North American restaurants were up 4.8%, lower than the year-ago comps growth of 5.5%, but better than 0.1% in the last quarter.
International revenues were up 8.1% year over year, as higher royalties and commissary sales were offset by lower company-owned restaurant sales in China. Currency reduced international revenues by $2.2 million. Comps at system-wide international restaurants increased 5.3%, weaker than comps growth of 6.8% a year ago and 5.7% in the preceding quarter.
Income before income taxes was up 18.1% to $35.2 million due to increases in domestic company-owned restaurants, domestic commissaries income, North America franchising and International income.
Other Financial Update
The company repurchased $0.52 million shares worth $30.3 million in the quarter.
The company also paid a cash dividend of approximately $6.5 million (17.5 cents per share) during the second quarter of 2016. On Jul 28, 2016, the company’s board approved a 14% increase in the company’s dividend to 80 cents from 70 cents on an annual basis. The new quarterly dividend of 20 cents will be paid on Aug 19, 2016 to shareholders of record as of Aug 8, 2016.
Guidance for 2016
The company has raised its guidance for 2016.
Papa John’s now expects earnings in 2016 in the range of $2.35 to $2.45 per share, up from $2.30 to $2.40 per share expected previously. North America system-wide comps are projected to rise 3% to 5%, up from 2% to 4% previously.
Papa John’s presently has a Zacks Rank #2 (Buy).
Stocks to Consider
Investors interested in the restaurant industry can also consider Dave & Buster's Entertainment, Inc. PLAY, The Cheesecake Factory, Inc. CAKE and Domino’s Pizza, Inc. DPZ. While Dave & Buster’s sports a Zacks Rank #1 (Strong Buy), Cheesecake Factory and Domino’s Pizza carry a Zacks Rank #2 (Buy).
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