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Papa John's (PZZA) Falls 37% in a Year: What's Hurting it?
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Are you still holding shares of Papa John's International, Inc. (PZZA - Free Report) and waiting for a miracle to take the stock higher in the near term? If yes, then you might lose more money as chances are very slim that the stock, which has lost its value by 37.1% in the past year, will take a U-turn in the near term. In the same period, the Zacks Restaurant industry declined 11.9%. Let’s delve deeper and analyze the factors that are hurting this Zacks Rank #4 (Sell) company.
Primary Concerns
The decline in comps is hurting the company’s performance. Papa John’s comps declined in second-quarter fiscal 2022, after strong performances in the preceding ten quarters. In the fiscal second quarter, total comparable sales fell 1.4% year over year against a 9% growth reported in the prior-year quarter.
Domestic company-owned restaurant comps in the quarter under review declined 1.5% year over year against a rise of 5.6% reported in the year-ago quarter. Comps at international restaurants were down 8% year over year against growth of 21.2% reported in the prior-year quarter.
During the fiscal second quarter, total global system-wide restaurant sales growth came in at 2.6% year over year compared with a 12.2% rise reported in the prior-year quarter.
On the other hand, the company, like other industry players, has been facing significant supply chain challenges and inflation across most commodities and categories. This resulted in cost pressures in the first quarter of fiscal 2022, including costs related to strategic staffing initiatives.
New hiring, referral and appreciation bonuses also added to the woes. Challenging macro environments, including softening economic conditions (in the U.K.) and accelerating commodity costs and labor inflation hurt the company. It anticipates the headwinds to persist into the second half of 2022.
Maintaining liquidity has become a herculean task since the outbreak of coronavirus. As of Jun 26, 2022, the company’s long-term debt came in at $536.4 million compared with $$528.1 million on Mar 27, 2022. Its debt to capitalization at the end of second-quarter fiscal 2022 came in at 173.8%, up from 162.2% reported in the previous quarter.
The company ended the fiscal second quarter with cash and cash equivalents of $52.7 million (compared with $80.7 million in the previous quarter), which may not be enough to manage the high debt level.
Image Source: Zacks Investment Research
Growth Projections
The company’s earnings in 2022 are likely to witness a decline of 13.4%. In the past 60 days, the Zacks Consensus Estimate for 2022 earnings has witnessed a downward revision of 9.5% to $3.04. However, in 2022, revenues are likely to witness growth of 2.1% year over year.
Tecnoglass currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 24.4%, on average. Shares of the company have increased 3.6% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TGLS’s 2022 sales and earnings per share (EPS) suggests growth of 28.2% and 47.7%, respectively, from the year-ago period’s levels.
Cracker Barrel currently carries a Zacks Rank #2 (Buy). It has a long-term earnings growth of 6.9%. Shares of the company have decreased 21.3% in the past year.
The Zacks Consensus Estimate for CBRL’s 2022 sales and EPS suggests growth of 16.3% and 15.4%, respectively, from the year-ago period’s levels.
Arcos Dorados carries a Zacks Rank #2. It has a long-term earnings growth of 34.4%. Shares of the company have risen 36.8% in the past year.
The Zacks Consensus Estimate for ARCO’s 2022 sales and EPS suggests growth of 27.1% and 104.2%, respectively, from the year-ago period’s levels.
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Papa John's (PZZA) Falls 37% in a Year: What's Hurting it?
Are you still holding shares of Papa John's International, Inc. (PZZA - Free Report) and waiting for a miracle to take the stock higher in the near term? If yes, then you might lose more money as chances are very slim that the stock, which has lost its value by 37.1% in the past year, will take a U-turn in the near term. In the same period, the Zacks Restaurant industry declined 11.9%. Let’s delve deeper and analyze the factors that are hurting this Zacks Rank #4 (Sell) company.
Primary Concerns
The decline in comps is hurting the company’s performance. Papa John’s comps declined in second-quarter fiscal 2022, after strong performances in the preceding ten quarters. In the fiscal second quarter, total comparable sales fell 1.4% year over year against a 9% growth reported in the prior-year quarter.
Domestic company-owned restaurant comps in the quarter under review declined 1.5% year over year against a rise of 5.6% reported in the year-ago quarter. Comps at international restaurants were down 8% year over year against growth of 21.2% reported in the prior-year quarter.
During the fiscal second quarter, total global system-wide restaurant sales growth came in at 2.6% year over year compared with a 12.2% rise reported in the prior-year quarter.
On the other hand, the company, like other industry players, has been facing significant supply chain challenges and inflation across most commodities and categories. This resulted in cost pressures in the first quarter of fiscal 2022, including costs related to strategic staffing initiatives.
New hiring, referral and appreciation bonuses also added to the woes. Challenging macro environments, including softening economic conditions (in the U.K.) and accelerating commodity costs and labor inflation hurt the company. It anticipates the headwinds to persist into the second half of 2022.
Maintaining liquidity has become a herculean task since the outbreak of coronavirus. As of Jun 26, 2022, the company’s long-term debt came in at $536.4 million compared with $$528.1 million on Mar 27, 2022. Its debt to capitalization at the end of second-quarter fiscal 2022 came in at 173.8%, up from 162.2% reported in the previous quarter.
The company ended the fiscal second quarter with cash and cash equivalents of $52.7 million (compared with $80.7 million in the previous quarter), which may not be enough to manage the high debt level.
Image Source: Zacks Investment Research
Growth Projections
The company’s earnings in 2022 are likely to witness a decline of 13.4%. In the past 60 days, the Zacks Consensus Estimate for 2022 earnings has witnessed a downward revision of 9.5% to $3.04. However, in 2022, revenues are likely to witness growth of 2.1% year over year.
3 Picks You Can’t Miss Out On
Some better-ranked stocks in the Zacks Retail-Wholesale sector are Tecnoglass Inc. (TGLS - Free Report) , Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) and Arcos Dorados Holdings Inc. (ARCO - Free Report) .
Tecnoglass currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 24.4%, on average. Shares of the company have increased 3.6% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TGLS’s 2022 sales and earnings per share (EPS) suggests growth of 28.2% and 47.7%, respectively, from the year-ago period’s levels.
Cracker Barrel currently carries a Zacks Rank #2 (Buy). It has a long-term earnings growth of 6.9%. Shares of the company have decreased 21.3% in the past year.
The Zacks Consensus Estimate for CBRL’s 2022 sales and EPS suggests growth of 16.3% and 15.4%, respectively, from the year-ago period’s levels.
Arcos Dorados carries a Zacks Rank #2. It has a long-term earnings growth of 34.4%. Shares of the company have risen 36.8% in the past year.
The Zacks Consensus Estimate for ARCO’s 2022 sales and EPS suggests growth of 27.1% and 104.2%, respectively, from the year-ago period’s levels.