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Why Did Analysts Lower Estimates for Papa John’s after 1Q16 Results?

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PZZA’s same-store sales growth

On the back of same-store sales growth of 6.8% in 1Q15, analysts expected Papa John’s (PZZA) to post same-store sales growth of 0.5%. PZZA, which forms 0.03% of the holdings of the iShares Russell 1000 ETF (IWB), beat the analysts’ estimates by posting systemwide SSSG of 1.6%. Despite this, analysts have lowered the same-store sales growth estimate for 2Q16 from 2.3% to 2%.

Why Did Analysts Lower Estimates for Papa John's after 1Q16 Results?

However, analysts continue to maintain their estimates for 3Q16 and 4Q16 at 2.4% and 3.9%, respectively. The company management has maintained its same-store sales growth guidance for fiscal 2016 at 2%–4%. In 1Q17, analysts are expecting Papa John’s to post same-store sales growth of 3%.

Why Did Analysts Lower Estimates for Papa John's after 1Q16 Results?

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PZZA’s revised EPS

With same-store sales growth being lowered, it is expected that Papa John’s (PZZA) EPS will also be revised downward. Analysts have revised their respective EPS estimates for 2Q16, 3Q16, 4Q16, and 1Q17 from $0.55, $0.52, $0.67, and $0.72 to $0.54, $0.51, $0.66, and $0.71.

For fiscal 2016, the company management has set the guidance at $2.30–$2.40. Analysts’ latest estimates indicate $2.40, which represents a 14.4% growth from $2.10 in 2015.

Peer comparisons

In 2016, Domino’s Pizza (DPZ), YUM! Brands (YUM), and Starbucks (SBUX) are expected to post EPS growth of 19.1%, 14.7%, and 19.9%, respectively.

In the next article, we will discuss, how the 1Q16 results affected Papa John’s PE multiple.

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