Why Analysts Expect Papa John’s Revenue to Expand in 1Q16



Revenue sources

Papa John’s (PZZA) generates its revenue from company-operated restaurant sales, supply chain or revenue from commissaries, and franchisee fees and royalties collected from its franchisees. In 4Q15, the revenue from company-owned restaurant sales formed 46.3% of the total revenue.

Why are Analysts Expecting Papa John’s Revenue to Expand in 1Q16?

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1Q16 estimates

Analysts expect Papa John’s to post revenue of $441 million in 1Q16. This represents 2% growth from $432.2 in 1Q15. Analysts expect positive same-store sales growth and unit growth to drive Papa John’s 1Q16 revenue.

Compared to 1Q15, the company was operating 14 more company-owned restaurants by the end of 2015. This is expected to boost the revenue from company-owned restaurants. In 1Q16, analysts expect the company to increase its overall unit count by 26. This means that the company will be operating 220 more units compared to 1Q15. More units increase the revenue from the supply chain. It also increases franchise fees and royalties from franchised restaurants. However, the strong dollar could dent the revenue from its international operations. It forms 6.2% of the overall revenue.

Peer comparison

During 1Q16, Papa John’s peers Starbucks (SBUX) and Yum! Brands (YUM) registered revenue growth of 9.4%, and -0.1%, respectively. Domino’s Pizza (DPZ) is expected to post revenue growth of 8.5%.

2016 outlook

For 2016, Papa John’s management set revenue growth guidance of 4%–6%—compared to 2.5% in 2015. All of the quarters are expected to post positive same-store sales growth. The unit count is expected to rise by 180–210 units. Papa John’s forms 0.21% of the holdings of the iShares Russell 2000 Growth ETF (IWO). Analysts expect the company to post revenue of $1.7 billion. This represents 4.8% growth.


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