Why Papa John’s Stock Rose after 4Q17 Earnings

Papa John’s (PZZA) posted its 4Q17 earnings after the market closed on February 27, 2018. The company posted adjusted EPS (earnings per share) of $0.65 on revenues of $467.6 million. Compared to 4Q16, the company’s adjusted EPS fell 5.8%, while its revenues rose 6.4%.

Analysts were expecting Papa John’s to post  EPS of $0.67 on revenues of $465.61 million. The company’s management announced on February 27, 2018, that it had ended its official sponsorship of the NFL. Despite all the negative news, Papa John’s was trading at $60.04 on March 1, 2018, a rise of 6.5% since the announcement of 4Q17 earnings. The announcement that the company’s focus would be on improving its value perception, the implementation of technological advancements, its loyalty program, and other advertising avenues to drive its sales appears to have increased investors’ confidence.

In 2017, Papa John’s stock fell 34.4%. However, since the beginning of 2018, the company’s stock price has increased 7.0%. In comparison, Domino’s Pizza (DPZ) and Yum! Brands (YUM) have risen 17.9% and -2.3%, year-to-date, respectively. The S&P 500 Index (SPX) and the Consumer Discretionary Select Sector SPDR Fund (XLY) have returned 0.2% and 4.3%, respectively.

In this series, we’ll look at Papa John’s 4Q17 performance by comparing it with analysts’ estimates. We’ll also cover the management’s guidance and analysts’ estimates for 2018. Finally, we’ll end the series by looking at the company’s valuation multiple and analysts’ recommendations.

Let’s start by discussing Papa John’s 4Q17 revenue.