Following the release of third-quarter 2013 results on Nov 5,
leading pizza restaurant chain,
Papa John's International Inc.
) share price declined nearly 2% in the past two days' regular
trading session due to soft share market conditions.
Papa John's' third-quarter earnings of 64 cents per share,
missed the Zacks Consensus Estimate of 66 cents by 3.03% due to
However, quarterly earnings were up 18.5% from the comparable
year-ago quarter's earnings of 54 cents. The year-over-year rise
in revenues was driven by the company's higher top line.
Total revenue increased 6.4% year over year to $346.3 million,
led by higher comparable restaurant sales (comps) growth in the
domestic as well as international markets, increased sales at the
company-owned units, improved franchise royalties and unit
expansion. However, revenues missed the Zacks Consensus Estimate
of $348 million by 0.6%.
Behind the Headline Numbers
Papa John's earns revenues from its North America and
Domestic company-owned restaurant
revenues increased 6.5% year over year to $152.7 million, led by
5.1% rise in company-owned comps.
North America Franchise royalties
also went up 3.4% year over year to $19.4 million, gaining from a
rise in net franchised units and positive franchise comps growth
of 0.6%. However, Papa John's' increased incentives to franchisee
affected royalty revenues.
Domestic commissaries sales
also climbed 4.1% year over year to $138.0 million with the rise
in sales volume and higher commodity prices.
increased 24.2% year over year to $22.4 million, powered by a
system-wide international comps growth of 8.1% and unit
In the quarter under review, Papa John's' operating income
grew 1.1% year over year to $21.4 million as increased top line
made up for the higher costs. Operating income for the domestic
company-owned restaurants remained flat year over year as lower
gross margin offset the 5.1% rise in comps.
During the quarter, the company opened 90 restaurants while
closing 46 units worldwide. As of Sep 30, 2013, Papa John's had
4,296 restaurants across 34 countries. The company expects net
unit growth to be within 245-275 up from 230-260.
During the third quarter, Papa John's bought back 0.2 million
shares worth $10.3 million. Currently 21.5 million shares remain
under the company's existing $80.1 million share repurchase
Papa John's increased its earnings guidance for 2013 based on
earnings and top-line growth and lower outstanding share count.
The company now expects earnings within $3.02 to $3.10, up from
the previous guidance of $2.92 to $3.00.
The company has also raised its comps guidance. Papa John's
expects North American comps to increase in the range of 2.5% to
3.5%, up from the prior guidance of 1.5% to 2.5%. International
comps are expected to increase in the range of 7.0% to 8.0% from
5.0% to 7.0% in 2013.
Though Papa John's' earnings and sales missed the estimates
during the quarter it has witnessed double-digit earnings growth
during the quarter. The company's focus on menu innovation and
international expansion are quite encouraging. However, a weak
macroeconomic environment remains a headwind.
Other Stocks to Consider
Papa John's holds a Zacks Rank #2 (Buy). Some other players in
the restaurant industry which look attractive at the current
Red Robin Gourmet Burgers Inc.
Cracker Barrel Old Country Store, Inc.
Bob Evans Farms, Inc.
). All these companies carry a Zacks Rank #2.
BOB EVANS FARMS (BOBE): Free Stock Analysis
CRACKER BARREL (CBRL): Free Stock Analysis
PAPA JOHNS INTL (PZZA): Free Stock Analysis
RED ROBIN GOURM (RRGB): Free Stock Analysis
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