Take one look at this “Dad bod” of mine and you’ll see that I’ve never shied away from a pizza. The Chicago pizza snob in me isn’t the reason why I’m making this stock my Bear of the Day. No, I’m putting this one on the naughty list for a simple reason; analysts have been dropping their earnings estimates.
Today’s Bear of the Day is Zacks Rank #5 (Strong Sell) Papa John’s (PZZA - Free Report) . Papa John’s International, Inc. operates and franchises pizza delivery and carryout restaurants under the Papa John’s trademark in the United States and internationally. It operates through five segments: Domestic Company-Owned Restaurants, North America Commissaries, North America Franchising, International Operations, and All Others. The company also operates dine-in and delivery restaurants. As of December 25, 2016, it operated 5,097 Papa John’s restaurants, including 744 company-owned and 4,353 franchised restaurants.
The company has been handed down a round of negative earnings estimate revisions. Over the last thirty days, two analysts have dropped their numbers for the current quarter, current year and next year. The bearish sentiment has had an impact on our Zacks Consensus Estimate for each of these periods. This quarter’s number has dropped from 86 cents or 74 cents, while the current year acks Consensus Estimate has gone down from $2.85 to $2.77. The most dramatic impact is reflected in next year’s consensus where the number has dipped 7.7% from $3.25 to $3.
Investors have already felt the pain with the stock coming down from $90 in December to under $59 during Monday’s trading session. Since topping out on December 21st, 2016, shares have dipped 34.2% while the S&P 500 has rallied 14.5%. Meanwhile, forward valuations have been cratering. After trading over 30x forward 12 P/E to start the year, PZZA now trades at a 20.72 multiple. There’s still plenty of room to the downside as the S&P 500 trades at about 18.7x right now.
Looking for other stocks in the same industry? Take a look at Zacks Rank #1 (Strong Buy) JD Wetherspoon or Zacks Rank #2 (Buy) stocks Bob Evans BOBE or Restaurant Brands International (QSR - Free Report) .
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