Papa John's (PZZA) Q3 Earnings Beat Estimates, Revenues Lag
Papa John’s International, Inc. PZZA reported dismal fiscal third-quarter 2023 results, with earnings and revenues missing the Zacks Consensus Estimate. Although the bottom line declined on a year-over-year basis, the top line increased.
The upside was primarily driven by solid system-wide restaurant sales growth and higher transactions. Also, the emphasis on product innovation, operational excellence, and a strong value proposition added to the positive. However, the dilutive impact of its recently acquired restaurants in the U.K. affected the company’s bottom line.
Following the results, shares of the company dropped 3.5% during trading hours on Nov 2.
Earnings & Revenue Discussion
During the fiscal third quarter, the company reported adjusted earnings per share (EPS) of 53 cents, missing the Zacks Consensus Estimate of 56 cents. The company reported an adjusted EPS of 54 cents in the prior-year quarter.
Papa John's International, Inc. Price, Consensus and EPS Surprise
Papa John's International, Inc. price-consensus-eps-surprise-chart | Papa John's International, Inc. Quote
Quarterly revenues of $522.8 million missed the consensus mark of $527.4 million by 0.9%. However, the top line increased by 2.4% on a year-over-year basis.
Global Restaurant Sales & Comps
In the fiscal third quarter, total comparable sales increased 2.2% year over year against a 3.4% fall reported in the prior-year quarter.
Domestic company-owned restaurant comps in the quarter under review increased 5.9% year over year against a decline of 2.2% reported in the year-ago quarter. Our estimate for the metric was 5.8%.
At North America franchised restaurants, comps rose 2.2% year over year against a fall of 0.5% reported in the year-ago quarter. Comps growth at North America restaurants rose 2.9% year over year against a fall of 0.8% reported in the year-ago quarter.
Comps at international restaurants were down 0.3% year over year compared with 10.1% fall reported in the prior-year quarter. During the fiscal third quarter, total global system-wide restaurant sales growth came in at 5.1% year over year compared with a 0.5% rise reported in the prior-year quarter.
Operating Highlights
Adjusted operating income in the fiscal third quarter totaled $33.6 million, in line with the prior year period.
During the quarter under review, total costs and expenses amounted to $490.9 million compared with $490.1 million reported in the prior-year quarter. Our estimate for the metric was $492.1 million.
Balance Sheet
As of Sep 24, 2023, cash and cash equivalents totaled $37.5 million compared with $43.8 million as of Jun 25, 2023. At the end of the fiscal third quarter, the long-term debt net totaled $769.2 million compared with $768.8 million at the end of the second quarter of fiscal 2023.
As of Sep 24, 2023, inventories were $37.7 million compared with $41.4 million on Jun 24, 2023. Free cash flow (for the nine months ending Sep 24, 2023) totaled $76 million compared with $28.1 million reported in the prior year.
Unit Developments
Papa John’s opened eight net new restaurants in North America during the fiscal third quarter. In the international markets, the company opened 37 net new restaurants. As of Sep 24, the company had a global restaurant count of 5,825, with operations in 48 countries and territories worldwide.
Zacks Rank & Recent Retail-Wholesale Releases
Papa John's currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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