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Papa John's Q3 Earnings In Line, Revenues Lag; Comps Soft

Papa John's International, Inc.PZZA posted third-quarter 2015 results wherein earnings came in line with the Zacks Consensus Estimate while revenues missed the same. Soft comps at the North America segment were partially offset by solid comps at system-wide international restaurants that led to sluggish global restaurant sales growth. Currency headwinds also continued to hurt revenues. Meanwhile, the company revised its earnings guidance for 2015 that fell short of market expectations. This lowered investors' confidence and shares dropped 7% in after-hours.

Adjusted earnings of 45 cents per share came in line with the Zacks Consensus Estimate. Meanwhile, earnings increased 15.4% year over year owing to a decline in total costs and expenses.

Papa John's International Inc. (PZZA) - Earnings Surprise | FindTheCompany

Revenues of $389.3 million missed the consensus mark of $394.0 million by 1.2%. Also, it declined 0.3% year over year. The downside reflects lower point-of-sale system equipment sales as well as lower PJ Food Service sales.

Behind the Headline Numbers

Global restaurant sales growth in the third quarter was 3.9% that compared unfavorably with the year-ago comps growth of 10.2% and 6.4% in the prior quarter. Soft comps reflect currency headwinds. Excluding foreign currency impact, global restaurant sales growth was 7% that also compared unfavorably with the year-ago comps growth of 10.7% and prior quarter comps growth of 8.8%. Soft comps at the North America segment were partially offset by solid comps at system-wide international restaurants.

Total revenue at the North America segment was $362.3 million, down 0.5% year over year owing to a decline in Franchise royalties, Franchise and development fees, Domestic commissary sales and Other sales. However, it was partially offset by an increase in Domestic company-owned restaurant sales. Comps at system-wide North American restaurants were up 3%, lower than the year-ago comps growth of 7.4% and 5.5% in the last quarter.

International revenues were $27 million, up 2.3% year over year, backed by an increase in Royalties and franchise and development fees and Restaurant and commissary sales. Comps at system-wide international restaurants increased 8%, better than comps growth of 5.5% a year ago and 6.8% in the second quarter.

Total costs and expenses were $361.8 million, down 0.9% year over year as a 2.8% decrease in total domestic commissary expenses and a 41% decline in Other operating expenses was partially offset by a 6.6% increase in total domestic company-owned restaurant expenses and a 7% rise in general and administrative expenses.

Guidance for 2015 Revised

Papa John's now expects earnings in 2015 to be at the lower end of the previously expected range of $2.04 to $2.10 per share. This falls short of the Zacks Consensus Estimate of $2.08.

Papa John's presently has a Zacks Rank #3 (Hold).

Stocks to Consider

Some stocks in the restaurant industry that can be considered are BJ's Restaurants, Inc. BJRI , Dave & Buster's Entertainment, Inc. PLAY and Carrols Restaurant Group, Inc. TAST . All these stocks sport a Zacks Rank #1 (Strong Buy).

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BJ'S RESTAURANT (BJRI): Free Stock Analysis Report

PAPA JOHNS INTL (PZZA): Free Stock Analysis Report

CARROLS RESTRNT (TAST): Free Stock Analysis Report

DAVE&BUSTRS ENT (PLAY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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