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What Lies Ahead for Papa John's (PZZA) this Earnings Season?

World’s third largest pizza delivery company, Papa John’s International, Inc. PZZA, is expected to report second-quarter 2017 numbers on Aug 1, after market closes.

Last quarter, Papa John’s came up with a positive earnings surprise of 2.67%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 8.55%.

Let’s see how things are shaping up for this announcement.

Factors Likely to Affect Q2 Results

Papa John's has been delivering positive comps in both domestic and international markets over the last several quarters on the back of various sales building initiatives such as menu innovation and provision of value offers. We expect this trend to have continued in the to-be-reported quarter as well.

Furthermore, this pizza delivery company’s strategic partnerships along with continued international expansion bode well. Also, its shift to a healthy menu and commitment to provide quality food should appeal to health conscious customers and boost traffic.

Additionally, the company’s extensive investments in technology-driven initiatives like digital ordering, applications development and launch of digital pizza tracker are expected to attract customers and drive growth as well as efficiency in the second quarter.

Nevertheless, a soft consumer spending environment in the U.S. restaurant space might limit the to-be-reported quarter’s revenue growth. Meanwhile, negative currency translation could hamper the quarter’s results, given Papa John's substantial international exposure. Notably, rising labor costs and expenses incurred to execute the initiatives might also dent the quarter’s profits.

Earnings Whispers

Our proven model does not conclusively show an earnings beat for Papa John’s this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as elaborated below.

Zacks ESP: Papa John’s has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 63 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Papa John’s has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Whole Foods Market, Inc. WFM has an Earnings ESP of +4.35% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Yum! Brands, Inc. YUM has an Earnings ESP of +1.64% and a Zacks Rank #3.

The Priceline Group Inc. PCLN has an Earnings ESP of +2.31% and a Zacks Rank #3.

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The Priceline Group Inc. (PCLN): Free Stock Analysis Report
 
Yum! Brands, Inc. (YUM): Free Stock Analysis Report
 
Papa John's International, Inc. (PZZA): Free Stock Analysis Report
 
Whole Foods Market, Inc. (WFM): Free Stock Analysis Report
 
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