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Papa John's (PZZA) Q2 Earnings Match Estimates, Revenues Lag
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Papa John’s International, Inc. (PZZA - Free Report) reported second-quarter 2023 results, with earnings meeting the Zacks Consensus Estimate and revenues missing the same. The top and the bottom line declined on a year-over-year basis. The downside was primarily driven by dismal franchisees comp performance and a challenging operating environment.
Nevertheless, the company reported sequential improvements in comps on the back of the menu innovation pipeline and accelerated unit developments. Moving ahead, the company emphasized modifications to revenue management strategies, leveraging best operating principles and deploying marketing optimizations to support its franchisees business. The company expects to achieve positive comp sales (at company-owned and franchise restaurants) in the back half of 2023.
Earnings & Revenue Discussion
During the fiscal second quarter, the company reported adjusted earnings per share (EPS) of 59 cents, in line with the Zacks Consensus Estimate. The company reported an adjusted EPS of 74 cents in the prior-year quarter.
Papa John's International, Inc. Price, Consensus and EPS Surprise
Quarterly revenues of $514.5 million missed the consensus mark of $530 million by 2.9%. However, the top line dropped 1.6% on a year-over-year basis.
Global Restaurant Sales & Comps
In the fiscal second quarter, total comparable sales dropped 1.3% year over year compared with 1.4% fall reported in the prior-year quarter.
Domestic company-owned restaurant comps in the quarter under review increased 2.2% year over year against a decline of 1.5% reported in the year-ago quarter. Our estimate for the metric was 5.4%.
At North America franchised restaurants, comps fell 2.3% year over year compared against a rise of 1.4% reported in the year-ago quarter. Comps growth at North America restaurants fell 1.4% year over year compared against a rise of 0.9% reported in the year-ago quarter.
Comps at international restaurants were down 0.7% year over year compared with 8% fall reported in the prior-year quarter. During the fiscal second quarter, total global system-wide restaurant sales growth came in at 2% year over year compared with a 2.6% rise reported in the prior-year quarter.
Operating Highlights
Adjusted operating income in the fiscal second quarter totaled $36.9 million compared with $40.4 million reported in the year-ago quarter.
During the quarter under review, total costs and expenses amounted to $479.6 million compared with $483.8 million reported in the prior-year quarter. Our estimate for the metric was $493.2 million.
Balance Sheet
As of Jun 25, 2023, cash and cash equivalents totaled $43.8 million compared with $46.7 million as of Mar 26, 2023. At the end of the fiscal second quarter, the long-term debt net totaled $768.8 million compared with $797.4 million at the end of the first quarter of fiscal 2023.
As of Jun 25, 2023, inventories were $37.5 million compared with $37.1 million on Mar 26, 2023. Free cash flow (for the six months ending Jun 25, 2023) totaled $59 million compared with $14.8 million reported in the prior year.
The company announced a hike in its quarterly dividend payout. PZZA raised its quarterly dividend by 10%, indicating its intention to utilize free cash to boost shareholders’ returns. The company raised the quarterly dividend to 46 cents per share (or $1.84 annually) from the previous payout of 42 cents (or $1.68 annually). The hiked dividend will be paid out on Aug 25, 2023, to shareholders on record as of Aug 14, 2023.
Unit Developments
Papa John’s opened five net new restaurants in North America during the fiscal second quarter. In the international markets, the company opened 42 net new restaurants. As of Jun 25, the company had a global restaurant count of 5,780, with operations in 48 countries and territories worldwide.
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The Zacks Consensus Estimate for PLAY’s 2024 sales and EPS indicates a rise of 17% and 29%, respectively, from the year-ago period’s levels.
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The Zacks Consensus Estimate for Domino's 2024 sales and EPS suggests growth of 6.3% and 14.6%, respectively, from the year-ago period’s levels.
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The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 10% and 27.7%, respectively, from the year-ago period’s levels.
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Papa John's (PZZA) Q2 Earnings Match Estimates, Revenues Lag
Papa John’s International, Inc. (PZZA - Free Report) reported second-quarter 2023 results, with earnings meeting the Zacks Consensus Estimate and revenues missing the same. The top and the bottom line declined on a year-over-year basis. The downside was primarily driven by dismal franchisees comp performance and a challenging operating environment.
Nevertheless, the company reported sequential improvements in comps on the back of the menu innovation pipeline and accelerated unit developments. Moving ahead, the company emphasized modifications to revenue management strategies, leveraging best operating principles and deploying marketing optimizations to support its franchisees business. The company expects to achieve positive comp sales (at company-owned and franchise restaurants) in the back half of 2023.
Earnings & Revenue Discussion
During the fiscal second quarter, the company reported adjusted earnings per share (EPS) of 59 cents, in line with the Zacks Consensus Estimate. The company reported an adjusted EPS of 74 cents in the prior-year quarter.
Papa John's International, Inc. Price, Consensus and EPS Surprise
Papa John's International, Inc. price-consensus-eps-surprise-chart | Papa John's International, Inc. Quote
Quarterly revenues of $514.5 million missed the consensus mark of $530 million by 2.9%. However, the top line dropped 1.6% on a year-over-year basis.
Global Restaurant Sales & Comps
In the fiscal second quarter, total comparable sales dropped 1.3% year over year compared with 1.4% fall reported in the prior-year quarter.
Domestic company-owned restaurant comps in the quarter under review increased 2.2% year over year against a decline of 1.5% reported in the year-ago quarter. Our estimate for the metric was 5.4%.
At North America franchised restaurants, comps fell 2.3% year over year compared against a rise of 1.4% reported in the year-ago quarter. Comps growth at North America restaurants fell 1.4% year over year compared against a rise of 0.9% reported in the year-ago quarter.
Comps at international restaurants were down 0.7% year over year compared with 8% fall reported in the prior-year quarter. During the fiscal second quarter, total global system-wide restaurant sales growth came in at 2% year over year compared with a 2.6% rise reported in the prior-year quarter.
Operating Highlights
Adjusted operating income in the fiscal second quarter totaled $36.9 million compared with $40.4 million reported in the year-ago quarter.
During the quarter under review, total costs and expenses amounted to $479.6 million compared with $483.8 million reported in the prior-year quarter. Our estimate for the metric was $493.2 million.
Balance Sheet
As of Jun 25, 2023, cash and cash equivalents totaled $43.8 million compared with $46.7 million as of Mar 26, 2023. At the end of the fiscal second quarter, the long-term debt net totaled $768.8 million compared with $797.4 million at the end of the first quarter of fiscal 2023.
As of Jun 25, 2023, inventories were $37.5 million compared with $37.1 million on Mar 26, 2023. Free cash flow (for the six months ending Jun 25, 2023) totaled $59 million compared with $14.8 million reported in the prior year.
The company announced a hike in its quarterly dividend payout. PZZA raised its quarterly dividend by 10%, indicating its intention to utilize free cash to boost shareholders’ returns. The company raised the quarterly dividend to 46 cents per share (or $1.84 annually) from the previous payout of 42 cents (or $1.68 annually). The hiked dividend will be paid out on Aug 25, 2023, to shareholders on record as of Aug 14, 2023.
Unit Developments
Papa John’s opened five net new restaurants in North America during the fiscal second quarter. In the international markets, the company opened 42 net new restaurants. As of Jun 25, the company had a global restaurant count of 5,780, with operations in 48 countries and territories worldwide.
Zacks Rank & Key Picks
Papa John’s currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the Zacks Retail – Restaurants industry include:
Dave & Buster's Entertainment, Inc. (PLAY - Free Report) sports a Zacks Rank #1 (Strong Buy). PLAY has a trailing four-quarter earnings surprise of 6.8% on average. Shares of PLAY have gained 9.6% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for PLAY’s 2024 sales and EPS indicates a rise of 17% and 29%, respectively, from the year-ago period’s levels.
Domino's Pizza, Inc. (DPZ - Free Report) sports a Zacks Rank #1. DPZ has a long-term earnings growth rate of 13%. The stock has gained 3.4% in the past year.
The Zacks Consensus Estimate for Domino's 2024 sales and EPS suggests growth of 6.3% and 14.6%, respectively, from the year-ago period’s levels.
Chuy's Holdings, Inc. carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 26.6% on average. Shares of CHUY have skyrocketed 85.2% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 10% and 27.7%, respectively, from the year-ago period’s levels.