Papa John's Shares Up 20.2% YTD: Will the Bull Run Continue?
Papa John’s International, Inc. PZZA is poised to benefit from product launches, strategic partnerships and re-franchising initiatives. Also, increased focus on digital ordering and the expansion of delivery channels have been the primary factors for sales improvement over the last few quarters.
Notably, shares of Papa John’s have outperformed the industry so far this year. The stock has gained 20.2% against the industry’s decline of 7.6%. Moreover, an upward revision in earnings estimates for 2020 reflects analysts’ optimism in the company’s growth potential. Over the past 30 days, the Zacks Consensus Estimate for 2020 earnings has moved up 8.3% to $1.44 per share.
Factors Driving Growth
Papa John's seems to be on a roll despite the coronavirus pandemic. The company recently provided an operational update, according to which, comparable sales for April and May fiscal 2020 period increased significantly.
Preliminary, estimated system-wide North America restaurants comparable sales for the first two fiscal periods (April and May) of the three months ending Jun 28, 2020 increased 26.9% and 33.5% year over year, respectively. Moreover, domestic company-owned restaurant comps for April and May rose 22% and 28.3% year over year, respectively. North America franchised restaurant comps for April and May advanced 28.4% and 35.1% year over year, respectively.
Papa John’s is investing heavily in technology-driven initiatives like digital ordering to boost sales. The company’s online and digital marketing activities have increased significantly over the past several years in response to increasing use of online and mobile web technology. In fact, Papa John’s continues to reinforce its commitment toward providing a better customer experience, with enhancements to the digital ordering process.
The company further expanded digital ordering capabilities with the launch of Facebook Instant Ordering and became the first national pizza chain to do so. Its partnership with UberEATS, and the existing door-to-door delivery service providers DoorDash and Postmates continue to boost sales.
Papa John’s is committed to develop and maintain a strong franchise system. The company is continually striving to eliminate barriers to expansion in existing international markets and identify new market opportunities. In 2019, it re-franchised 46 company-owned restaurants — including 19 in Georgia and 23 restaurants in Florida — for $4.74 million. Over the next several years, the company plans to increase its international units, a large portion of which will be franchised.
In addition to re-franchising initiatives, the company continues to focus on product introduction to drive growth. In February, Papa John's launched Papadias, a toasted handheld alternative to sandwiches. It also successfully launched Jalapeno Poppers during the first quarter of 2020. There are more product innovations in the pipeline but management has decided to hold them back and focus on meeting the current wave of demand in the most efficient way possible.
Zacks Rank & Other Key Picks
Papa John's currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other top-ranked stocks in the Retail-Wholesale sector include Sprouts Farmers Market, Inc. SFM, Wingstop Inc. WING and Yum China Holdings, Inc. YUMC. Sprouts Farmers sports a Zacks Rank #1, while Wingstop and Yum China carry a Zacks Rank #2.
Sprouts Farmers has a three-five year earnings per share growth rate of 4.4%.
Wingstop’s earnings for 2020 are expected to surge 39.7%.
Yum China has a trailing four-quarter positive earnings surprise of 62.9%, on average. The company’s earnings beat the Zacks Consensus Estimate in the last four quarters.
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