Papa John's International Inc.
) reported first-quarter 2013 earnings of 84 cents per share,
outperforming the Zacks Consensus Estimate of 81 cents by 3.7%
and the comparable year-ago quarter's earnings by 6.3%. Strong
revenue growth boosted the earnings for the quarter.
Total revenues jumped 7.3% year over year to $355.6 million
but missed the Zacks Consensus Estimate of $364 million by 2.6%.
The year-over-year improvement was attributable to higher
comparable restaurant sales (comps) in both domestic and
international markets, increased North America franchise royalty
revenues and unit expansion.
Revenues in the quarter also gained from Papa John's' higher
volume generation and traffic growth.
Behind the Headline Numbers
Domestic company-owned restaurant revenues
increased 9.8% to $157.9 million, signifying a 3.9% increase in
comps. In the first quarter, Papa John's acquired 50 restaurants
from its franchisee, which also helped augmenting the domestic
company-owned restaurant revenues.
Rise in net franchised units and positive comps of 0.8%,
resulted in a 1% increase in
franchise royalty revenues
to $20.7 million. However, Papa John's acquisition of the
aforementioned 50 restaurants resulted in a reduction in the
number of franchised stores, which in turn negatively impacted
increased 18.2% year over year to $19.9 million, powered by comps
growth of 8.2% and rise in the number of restaurants in the
Domestic commissaries revenues
witnessed an improvement of 4.6% year over year to $143.9
million, driven by higher sales volume and rise in commodity
In the quarter under review, Papa John's' operating income
also grew 8.6% year over year to $29.6 million, reflecting higher
operating income generation in North America franchising as well
as in the international market,.
Amid a growing sales environment, adjusted operating income
(incentive contribution excluded) for the domestic company-owned
restaurants were down nearly 3% year over year to $11 million
because of higher cheese prices.
Operating income for the North America franchising unit was up
0.5% year over year to $18.2 million, led by unit growth and
higher comps neutralizing the adverse impact of lower
The International segment's comps as well as unit expansion
also resulted in a 25.4% increase in the operating income to $341
million. However, a loss in the Corporate China division was a
slight drag on the operating income during the quarter.
Domestic commissaries segment's operating income was down 9%
annually to $10.2 million due to tough year-over-year
During the quarter, the company opened 34 restaurants
worldwide. As of Mar 31, 2013, Papa John's had 4,200 restaurants
across 34 countries.
Papa John's recently raised its earnings guidance for 2013.
The company now expects the earnings within $2.90 to $3.00, up
from the previous guidance of $2.85- $2.95.
Papa John's continues to expect that North America system-wide
comps will increase in the range of 1.5% to 2.5%. International
comparable revenues are expected to increase in the range of 5.0%
to 7.0% in 2013.
Moreover, international restaurant sales are likely to grow by
20%-25% on the back of unit growth and comps improvement.
Worldwide net units are expected to grow by 230 to 260. Further,
the company anticipated that total revenue growth will be in the
range of 6% to 7% with both the number of units and comps
Papa John's earnings and revenue growth, international
expansion and margin gains are quite impressive. The company
remains on an expansion spree, which will provide it with greater
scale and cost efficiency, going forward.
However, stiff competition and a tepid macroeconomic outlook,
which might affect footfall at the restaurants, are expected to
remain headwinds in the coming quarters.
Papa John's carries a Zacks Rank #2 (Buy). Some other
Domino's Pizza Inc.
CEC Entertainment Inc.
) surpassed our estimates on both lines this season while
Burger King Worldwide, Inc.
) beat revenues but earnings were in line with the Zacks
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CEC ENTERTANMNT (CEC): Free Stock Analysis
DOMINOS PIZZA (DPZ): Free Stock Analysis
PAPA JOHNS INTL (PZZA): Free Stock Analysis
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