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High Costs & Weak Comps to Mar Papa John's (PZZA) Q1 Earnings

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Papa John's International, Inc. (PZZA - Free Report) is scheduled to report first-quarter 2019 results on May 7, after the market closes.

The company is expected to have witnessed a decline in the topline in the to-be-reported quarter due to dismal comps performances. Also, earnings may have been affected due to high costs and weak operating results in the first quarter of 2019.

Of late, Papa John’s has been posting lower-than-expected earnings and also witnessing a decline in earnings for the past few quarters. This has led the company’s shares to fall over the past year. Shares of Papa John’s have lost 10.3% in a year’s time against the industry’s growth of 13.8%.



Let us find out how the company’s top and bottom-line results will shape up in the first quarter of 2019.

Top-Line Picture

Papa John’s dismal comps performance over the last few quarters was a reason for concern. Despite many sales-building initiatives, we believe that the company’s top line has suffered from bleak comps in the to-be-reported quarter. In the fourth quarter of 2018, global restaurant sales decreased 13%, comparing unfavorably with the third quarter's decline of 6.6% and the year-ago quarter’s growth of 9.9%. We expect the trend to have continued in the first quarter.

Overall revenues declined 20% in the fourth quarter of 2018 and are likely to have declined in the first quarter as well. The Zacks Consensus Estimate for first-quarter revenues is pegged at $374.2 million, reflecting a 12.4% decline from the year-ago quarter’s reported figure.

Earnings to Suffer From Weak Operating Results

Papa John’s has been witnessing weak operating results of late. Total operating loss was $8.3 million in the fourth quarter against operating income of $36.6 million in the year-ago quarter. Total costs and expenses amounted to $383.9 million, up 10.6% from fourth-quarter 2017.

We expect that the company’s operating results have continued to be weak in the to-be-reported quarter as well, which may have dented earnings. The consensus estimate pegs first-quarter earnings at 21 cents, suggesting a 58% decline from the year-ago quarter’s reported figure.

Quantitative Model Prediction

Our proven model doesn’t show that Papa John’s has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat in the first quarter. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Papa John’s has an Earnings ESP of 0.00%. Notably, Earnings ESP represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate.

Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a few stocks from the Restaurant space that investors may consider as our model shows that these have the right combination of elements to post an earnings beat in the first quarter.

Chuy’s Holdings (CHUY - Free Report) presently carries a Zacks Rank #3 and has an Earnings ESP of +9.38%. The company is scheduled to report quarterly numbers on May 7.

Potbelly (PBPB - Free Report) currently carries a Zacks Rank #3 and has an Earnings ESP of +25.00%. The company is scheduled to report quarterly numbers on May 7.

Cracker Barrel (CBRL - Free Report) has an Earnings ESP of +1.47% and a Zacks Rank #3 at present.

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