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We expect Papa John’s International, Inc. (PZZA - Free Report) to beat expectations when it reports fourth-quarter and full-year 2016 numbers on Feb 21, after market closes.

Last quarter, Papa John's posted a positive earnings surprise of 14.00%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 11.31%.

Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Papa John's is likely to beat on earnings because it has the perfect combination of the two key ingredients.

Zacks ESP: Earnings ESP for Papa John's is +4.55% because the Most Accurate estimate is pegged at 69 cents, while the Zacks Consensus Estimate stands at 66 cents. A favorable Zacks ESP serves as a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Papa John's currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Note that stocks with a Zacks Rank #1, 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Papa John's favorable Zacks Rank and positive ESP makes us reasonably confident of an earnings beat.

What is Driving the Better-than-Expected Earnings?

Papa John's has been delivering positive comps in both domestic and international markets since the beginning of 2014 on the back of various sales building initiatives such as menu innovation and provision of value offers. We expect this trend to continue in the to-be-reported quarter as well.

The company’s strategic partnerships along with large-scale international expansion plans also bode well. Moreover, the shift to a healthy menu in order to adapt to changing consumer preference should appeal to health conscious customers and boost traffic. Further, the company’s investments in technology-driven initiatives like digital ordering and applications development are expected to attract new customers and drive growth as well as efficiency in the to-be-reported quarter.

Nevertheless, a soft consumer spending environment in the U.S. restaurant space might hurt traffic and thereby comps in the fourth quarter. Likewise, negative currency translation could further affect the quarter’s performance as well, given the company’s substantial international exposure. Also, rising labor costs and expenses incurred to execute the initiatives might dent the quarter’s profits.

Stocks to Consider

Papa John’s is not the only company looking up this earnings season. Here are some other companies in the broader Retail-Wholesale sector to consider, as our model shows they also have the right combination of elements to post an earnings beat this quarter:

SpartanNash Company (SPTN - Free Report) has an Earnings ESP of +2.04% and a Zacks Rank #2.

Red Robin Gourmet Burgers, Inc. (RRGB - Free Report) has an Earnings ESP of +13.79% and a Zacks Rank #3.

The Priceline Group, Inc. (PCLN - Free Report) has an Earnings ESP of +0.46% and a Zacks Rank #3.

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