Papa John's (PZZA) Up 1.7% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Papa John's International, Inc. PZZA. Shares have added about 1.7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? 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 Q1 Earnings & Revenues Beat Estimates
Papa John’s reported better-than-expected first-quarter 2017 results wherein both earnings and revenues beat the respective Zacks Consensus Estimates.
Earnings and Revenue Discussion
Adjusted earnings of $0.77 per share beat the Zacks Consensus Estimate of $0.75 by 2.7%. Moreover, earnings increased 11.6% year over year owing to higher revenues and a lower share count.
Revenues of $449.3 million surpassed the consensus mark of $435.5 million by over 3%. Moreover, revenues increased 4.8% year over year primarily on the back of increase in North America franchise royalties and fees, higher North America commissary and other sales along with improved international revenues.
Behind the Headline Numbers
Global restaurant sales growth of 4.9% in the first quarter was better than 2.3% rise a year ago, but lower than 5.3% in the prior quarter.
Excluding foreign currency impact, global restaurant sales growth was 5.5%, which was also better than the year-ago comps growth of 4.2%, but lower than 7% in the prior-quarter.
Domestic company-owned restaurant sales were up 0.6%, primarily owing to a 3% increase in comparable sales. North America franchise royalties and fees were up 4.3% driven by a 1.7% rise in comparable sales. North America commissary and other sales were up 10.2% given higher volumes along with increased cheese prices charged to franchisees.
Comps at system-wide North American restaurants were up 2.0%, higher than 0.1% comps growth in the year-ago quarter, but lower than the 3.8% growth last quarter.
International revenues were up 3.9% year over year primarily due to higher comparable sales and increased royalty and fee income. Currency affected international revenues by $3.1 million. Comps at system-wide international restaurants increased 6.0%, better than comps growth of 5.7% a year ago and 5.6% in the preceding quarter.
2017 Outlook Reaffirmed
The company reiterated its previously announced guidance for 2017.
For 2017, Papa John’s continues to expect adjusted earnings per share to grow in the range of 8% to 12%.
North America system-wide comps are still 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 million and $55 million.
The company also continues to expect net global new unit to grow in the range of 4–5%, with majority of the growth anticipated in the second half of year.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
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, the stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% 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.
Our style scores indicate that the stock is more suitable for growth investors than value investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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