Why Did Analysts Raise EBITDA Margin and EPS Estimates for Papa John’s?



EBIT margins

Analysts have revised their estimated EBITDA (earnings before interest, tax, depreciation, and amortization) margins for Papa John’s (PZZA) for next four quarters. Specifically, PZZA’s analyst EBITDA estimates for 2Q16, 3Q16, 4Q16, and 1Q17 rose from 10.5%, 10.1%, 11.2%, and 12%, respectively, to 10.6%, 10.1%, 11.4%, and 12.1%, respectively.

The upward revision could be due to sales leverage from increases in estimated same-store sales growth and the expectation of declines in commodity prices.

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Revised estimated EPS

The upward revision of revenue estimates and EBITDA has also prompted analysts to raise their EPS (earnings per share) estimates for next four quarters. Earlier analysts had predicted that PZZA’s EPS for the next four quarters would be $2.4. Now, they have increased this estimate to $2.5, which represents a growth of 0.8% over the corresponding quarters of the previous year.

Peer comparisons

For the next four quarters, analysts expect peers Domino’s Pizza (DPZ), YUM! Brands (YUM), and Starbucks (SBUX) to post EPS growth of 16.2%, 8.8%, and 21.3%, respectively. Notably, Papa John’s makes up 0.3% of the holdings of the iShares Core S&P Small-Cap ETF (IJR).

In the next part, we’ll look at valuation multiple of Papa John’s.


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