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Papa John's (PZZA) Up 5.2% Since Earnings Report: Can It Continue?

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About a month has gone by since the last earnings report for Papa John's International, Inc. (PZZA - Free Report) . Shares have added about 5.2% in that time frame.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Papa John's Q2 Earnings Top, Revenues Lag Estimates

Papa John’s posted mixed second-quarter 2017 results, wherein earnings beat the Zacks Consensus Estimate while revenues lagged the same.

Earnings and Revenue Discussion

Adjusted earnings of 65 cents per share beat the Zacks Consensus Estimate of 63 cents by 3.2%. Moreover, earnings increased 6.6% year over year on higher revenues.

Revenues of $434.7 million missed the consensus mark of $456.6 million by 4.8%. However, revenues increased 2.8% year over year buoyed by a rise in North America franchise royalties and fees, higher North America commissary and other sales along with improved international revenues. Adverse forex translations however somewhat marred the results.

Behind the Headline Numbers

Global restaurant sales growth of 4.1% in the second quarter was lower than the last quarter’s rise of 4.9% as well as the year-ago quarter’s 5.9% increase.

Excluding foreign currency impact, global restaurant sales growth was 5.1%, also lower than the prior-quarter and year-ago comps growth of 5.5% and 7.7%, respectively.

Domestic company-owned restaurant sales were down 0.7% in spite of a 2.3% increase in comparable sales.

North America franchise royalties and fees were up 5.1% driven by a 1.1% rise in comparable sales. North America commissary and other sales rose 6.2% on higher volumes and commodity costs.

Comps at system-wide North American restaurants were up 1.4%, lower than 4.8% comps growth in the year-ago quarter and 2% in the last quarter.
    
International revenues were up 6.2% year over year primarily on positive comparable sales. Currency affected international revenues by $2.5 million. Comps at system-wide international restaurants increased 3.9%, which is lower than comps growth of 5.3% a year ago and 6% in the preceding quarter.

2017 Outlook Updated

For 2017, Papa John’s continues to maintain the adjusted earnings per share growth range at 8% to 12%. Notably, the reaffirmation of the earnings outlook excludes the impact of the raised share repurchase authorization as recently proposed.

North America system-wide comps are still projected to rise in the band of 2% to 4%.

Meanwhile, international comps are expected to be up 4% to 6% in 2017.

Capital expenditures are expected to range between $45 million and $55 million.

However, the company now expects net global new unit growth in the range of 3–4% (earlier 4—5%), primarily to mirror the closure of the stores in the Indian market.

For 2017, the company plans to return additional capital to shareholders through a $500-million increase in share repurchase authorization.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

VGM Scores

At this time, the stock has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than momentum investors.

Outlook

The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.



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