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Why Papa John’s 3Q17 Earnings Fail to Impress Analysts

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Why Papa John’s 3Q17 Earnings Fail to Impress Analysts PART 1 OF 8

Papa John’s Stock Dips on Weak Outlook

3Q17 performance

Papa John’s (PZZA) released its 3Q17 earnings on October 31, 2017, reporting adjusted EPS (earnings per share) of $0.60 on revenues of $431.7 million, which shows EPS growth of 5.3% and revenue growth of 2.2%.

Papa John&#8217;s Stock Dips on Weak Outlook

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Stock performance

Analysts were expecting Papa John’s to report EPS of $0.60 on revenues of $426.7 million. Despite meeting the analysts’ EPS estimate and outperforming the revenue expectation, the stock still fell due to its lowered 2017 guidance. The company’s management blamed NFL (National Football League) leadership for not resolving the issue of players’ kneeling during the US National Anthem as a statement against racial inequality, which has led to a decline in NFL viewership.

Papa John’s has been the official pizza of the NFL since 2010 and claims that the decline in viewership has been hurting its sales in 4Q17, leading to lower sales and EPS guidance. As of November 2, 2017, Papa John’s was trading at $63.02, which represents a fall of 7.4% since the announcement of its 3Q17 earnings.

Year-to-date performance

Since the beginning of 2017, the stock price of Papa John’s has fallen 26.4%. During the same period, peers Domino’s Pizza (DPZ) and Yum! Brands (YUM) have returned 11.8% and 25.0%, respectively, YTD (year-to-date)

Notably, the S&P 500 Index (SPX) and the Consumer Discretionary Select Sector SPDR Fund (XLY) have returned 15.2% and 12.2%, respectively, YTD. XLY has ~12.0% in restaurants, hotels, and leisure companies.

Series overview

In this series, we’ll assess Papa John’s 3Q17 earnings call and compared its performance with the analysts’ estimates. We’ll also cover the management’s updated 2017 guidance and the analysts’ estimates for next four quarters, closing the eight-part series with a look at Papa John’s valuation multiple and the analysts’ recommendations.

We’ll continue (below) with a look at Papa John’s revenue growth.

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