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Why Analysts Expect Papa John’s 2Q16 EPS to Rise

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Earnings per share

So far in this series, we have discussed Papa John’s (PZZA) estimated revenue, revenue sources, and estimated EBITDA (earnings before interest, tax, depreciation, and amortization) margins. Now, let’s discuss analysts’ EPS (earnings per share) estimates and management’s guidance for fiscal 2016.

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2Q16 expectations

In 2Q16, analysts expect Papa John’s (PZZA) to post EPS of $0.54, which represents a growth of 14.1% from $0.47 in 2Q15. The company has beaten analysts’ expectations three times in the last five quarters.

When the company beats its estimates, the share price tends to rise. In 1Q16, the company posted better-than-expected EPS. This has led to rise in its share price. When the announcement was made the next day, Papa John’s share price closed 8% higher.

The expectation of revenue growth of 3.8%, expansion of EBIT margins from 10.3% to 10.6%, and share repurchases in the last 12 months are expected to drive Papa John’s 2Q16 EPS growth. Share repurchases reduce the number of shares outstanding and increases the EPS. We’ll discuss share repurchases more in the next part of this series.

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Peer comparisons

In 2Q16, Yum! Brands (YUM) and Domino’s Pizza (DPZ) have posted EPS growth of 8.7% and 16.4%, respectively.

Outlook

With revenue and EBITDA margins expected to be expanded in the last two quarters of fiscal 2016, analysts are expecting the company to post EPS of $2.40 in 2016. This represents a growth of 15.1% from $2.10 in 2015.

The company’s management has set the guidance for 2016 to be in the range of $2.30–$2.40. In 1Q17, analysts are expecting the company to post EPS of $0.75, a year-over-year growth of 8.2%.

Next, we’ll look at Papa John’s dividend policy.

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