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Is Papa John's (PZZA) Set to Miss Q1 Earnings Estimates?

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Shares of Papa John's (PZZA - Free Report) dipped 1.63% on Monday just one day before the company is set to report its first quarter financial results, which could signal that investors are nervous about the pizza giant. Let’s take a quick look to see if they should be.

Before Monday’s dive, Papa John’s had seen its stock price tank 26% over the last year and nearly 4% during the last four weeks as investors assess how and if the company can transform itself going forward after a turbulent six months.

Papa John’s grabbed headlines at the tail end of 2017 when it blamed the NFL for slumping sales. Since then, its founder stepped down as CEO and Yum Brands’ (YUM - Free Report) Pizza Hut took over as the official pizza sponsor of the NFL—a gig that Papa John’s once pointed to as a huge reason for the company’s growth and success.

With that said, a strong quarter could turn things around, which means investors need to understand what to expect from Papa John’s upcoming earnings report.

Papa John's Q1 Outlook

Papa John's is projected to see its quarterly revenues sink 1.6% from the year-ago period to hit $441.95 million, based on our current Zacks Consensus Estimates. On the other end of the income statement, the pizza chain’s quarterly earnings are expected to plummet by 16.2% to $0.62 per share.

Meanwhile, Papa John's has also earned one earnings estimate revisions, with 100% agreement to the downside, within the last 30 days. Still, investors need to know a little more in order to understand if Papa John's is actually expected to beat or miss our current earnings estimate. Luckily, Zacks Premium customers can utilize the Earnings ESP Screener in order to search for stocks that are expected to surprise, either way.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

In contrast, a stock with a Zacks Rank #3 (Hold) or worse, coupled with a negative Earnings ESP, is one that we typically want to avoid during earnings season.

Papa John's Most Accurate Estimate—the representation of the most recent analyst sentiment—calls for earnings of $0.61 per share, which falls 1 cent below our current consensus estimate. The company is also currently a Zacks Rank #3 (Hold) and sports an Earnings ESP of -1.61%.

This means that Papa John's is a stock that could fall short of earnings estimates when it reports its Q1 financial results after market close on Tuesday. Therefore, investors might want to stay away from Papa John’s stock until they see how the first quarter plays out.

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