Why Have Analysts Raised their Revenue Estimates for Papa John’s?

Papa John’s (PZZA) classifies its operations into the following four main segments:

• Domestic Company-Owned Restaurants
• Domestic Commissaries and Other
• International Operations
• Domestic Franchising

In 1Q16, PZZA’s domestic company-owned restaurants generated nearly 48% of Papa John’s revenue, while domestic commissaries and others generated 39.4%.

Analysts have marginally raised their revenue estimates for next four quarters for PZZA. One month earlier, analysts had forecasted that the company’s revenue for next four quarters would be ~$1.716 billion. Now, they have raised the estimated revenue by 0.3% to $1.721 billion.

The increase in expected same-store sales growth estimates could be the reason that analysts raised their revenue estimates. The new estimated revenue represents a growth of 5.3% from the corresponding quarters of the previous year.

For next four quarters, analysts expect peers Domino’s Pizza (DPZ), YUM! Brands (YUM), and Starbucks (SBUX) to post revenue growth of 6.4%, 2.7%, and 11.7%, respectively. Notably, PZZA makes up 0.11% of the holdings of the iShares Russell 2000 ETF (IWM).

The steps adopted by Papa John’s to provide clean and high-quality pizzas and to improve the digital experience of its customers in restaurants could have prompted analysts to raise their same-store sales growth for next four quarters. They have raised their forecasts for 2Q16, 3Q16, 4Q16, and 1Q17 to 2.3%, 3.8%, 4.1%, and 5.3%, respectively, from earlier estimates of 2.2%, 3.5%, 3.9%, and 5.3%.

In the next part, we’ll look at revised estimated EBITDA margins and EPS of Papa John’s for next four quarters.