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Can Papa John's (PZZA) Run Higher on Rising Earnings Estimates?

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Papa John's (PZZA - Free Report) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.

The upward trend in estimate revisions for this pizza chain reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Papa John's, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

Current-Quarter Estimate Revisions

For the current quarter, the company is expected to earn $0.74 per share, which is a change of +85% from the year-ago reported number.

Over the last 30 days, six estimates have moved higher for Papa John's compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 15.1%.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $3.34 per share represents a change of +138.57% from the year-ago number.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for Papa John's. Over the past month, five estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 6.33%.

Favorable Zacks Rank

The promising estimate revisions have helped Papa John's earn a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Papa John's shares have added 7.8% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.


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