Papa John's Q1 2024 Results: Earnings Beat, Revenue Miss Amid Economic Headwinds

Papa John's reported mixed Q1 2024 results, beating earnings estimates but missing revenue expectations due to sales pressure and declining consumer confidence. The company's stock price declined 6.8% following the report, with analysts revising their price targets and maintaining a generally positive outlook.

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Aqsa Younas Rana
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Papa John's Q1 2024 Results: Earnings Beat, Revenue Miss Amid Economic Headwinds

Papa John's Q1 2024 Results: Earnings Beat, Revenue Miss Amid Economic Headwinds

Papa John's International, Inc. (NASDAQ: PZZA) reported mixed first-quarter 2024 results on Thursday, with earnings surpassing estimates but revenue falling short of expectations. The company's earnings per share (EPS) of $0.67 beat the Zacks Consensus Estimate of $0.58 by $0.09. However, revenue for the quarter came in at $513.92 million, missing the consensus estimate of $543.94 million and declining 2.5% from the same period last year.

Papa John's attributed the revenue miss to sales pressure and declining consumer confidence. North American franchised same-store sales declined 1.5%, compared to Loop Capital's estimate of a 1% decline and the consensus expectation of a 0.7% decrease. Following the earnings report, the company's stock price declined by 6.8%.

Why this matters: The decline in consumer confidence and sales pressure affecting Papa John's revenue is a reflection of the broader economic headwinds faced by the restaurant industry, which can have a ripple effect on employment and overall economic growth. As a major player in the industry, Papa John's performance can be seen as a bellwether for the sector's health and resilience.

Despite the challenging economic environment, Papa John's remains focused on executing its strategic initiatives. Interim CEO and CFO Ravi Thanawala stated, "Our teams are taking a disciplined approach to running the business, improving restaurant-level margins, and increasing operating profits despite a challenging environment in Q1." The company highlighted its Back to Better 2.0 and International Transformation initiatives, which aim to drive sustainable, profitable growth worldwide through improvements in restaurant operations, digital solutions, and marketing platforms.

For the full year 2024, Papa John's management expects revenue to be flat to down low single digits. The company projects adjusted operating income of $145 million to $155 million and capital expenditures of $75 million to $85 million. Papa John's aims to increase net new North American locations by 20% year-over-year and open 100 to 140 new international locations.

Following the Q1 2024 results, several analysts updated their opinions on Papa John's stock. Loop Capital's Alton Stump lowered the price target from $97 to $90 while maintaining a Strong Buy rating. Deutsche Bank's Lauren Silberman reduced the price target from $77 to $58, keeping a Hold rating. Wedbush's Nick Setyan decreased the price target from $76 to $65, maintaining a Buy rating. BMO Capital's Andrew Strelzik lowered the price target from $80 to $75, reiterating a Buy rating.

Currently, 66.7% of top-rated analysts rate Papa John's as a Strong Buy or Buy, while 33.3% see it as a Hold. No analysts recommend selling the stock. The consensus forecast among analysts is that Papa John's will deliver earnings per share of $3.78 in the upcoming year, representing a 65.2% year-over-year increase. Since the release of the latest quarterly report, the stock price has risen by 0.2% but remains down 31.9% year-over-year, trailing behind the S&P 500.

Papa John's Q1 2024 results reflect the ongoing challenges faced by the restaurant industry amid economic headwinds. While the company's earnings exceeded expectations, the revenue miss and downward revision of guidance underscore the impact of sales pressure and declining consumer confidence. As Papa John's navigates this dynamic environment, its focus on strategic initiatives and operational improvements will be crucial in driving long-term growth and profitability.