Papa John’s (NASDAQ: $PZZA) is an international fast-food pizza chain that operates franchised and company-owned pizza delivery restaurants. Its restaurants primarily offer a wide range of high-quality pizzas.
On Thursday, February 29, 2024, the company released its Q4 and FY23 results to a negative market reaction.
Papa John’s Q4 Results
The fast-food chain reported revenue of $571.3 million in Q4, an 8.6% Y/Y rise but below estimates of $578.2 million by 1.2%. Non-GAAP Q4 EPS was $0.91, up from $0.71 the previous year, beating estimates of $0.72 by 26.6%.
The company reported worldwide system-wide sales were up 11% for the quarter to $1.34 billion. It also reported 89 total unit openings, with 36 in North America and 53 internationally. For the fourth quarter, Papa John’s had a GAAP gross margin of 30.4%, an increase from 29.9% last year, while same-store sales increased 0.1% Y/Y.
For the full year, Papa John’s reported worldwide system-wide sales of $6.03 billion, a 5% Y/Y increase, while total revenue was up 2% to $2.14 billion. The FY23 non-GAAP EPS was $2.71, a decline from the $2.94 reported in FY23.
Balance Sheet
The company ended the year with a free cash flow of $116.4 million, compared to $39.4 million at the end of FY22, primarily driven by increased cash flow from operations and higher accrued expenses.
Its outstanding debt was $764 million as of the end of FY23, comprising $400 million outstanding under 3.875% senior note due 2029 and $364 million under its revolving credit facility. The company’s net long-term debt was $757.4 million, compared to $597.1 million at the end of FY23.
The company’s inventories stood at $36.1 million as of December 31, 20203, compared to $41.4 million as of December 25, 2022.
Dividend Payout
Papa John’s declared $58.5 million in dividends to common stockholders for FY23 at $1.76 per share. For the first quarter of fiscal 2024, the board approved a dividend payout of $0.46 per common share or $15.1 million in aggregate cash dividend.
Papa John’s (PZZA) Stock Performance
Fowling the disappointing Q4 results, PZZA stock ended the week 4.31% lower at $69.94 on Friday, March 1, 2024, from its Monday, February 26 opening price of $73.09 per share. Year-to-date, the stock is down 7.80%, and over the past 12 months, it has lost 19.18% of its value. Its market cap stands at $2.272 billion.
Papa John’s Stock Forecast
Following the release of its Q4 results, several analysts have revised their forecast for Papa John’s. The analysts now forecast a revenue of $2.19 billion for FY24, a 2.8% increase from FY23.
The analysts forecast statutory EPS will increase 4.9% to $2.63 for FY24, a downgrade from the previous forecast of $2.22 billion in FY24 revenue and an EPS of $2.77.
Analysts have maintained their consensus moderate buy rating, with an average price target of $82 per share. The most bullish predicts $97, while the most pessimistic expects $65. Based on the last closing price, the consensus price target represents a 17.24% upside.
Is PZZA Stock a Buy?
Based on the analysts’ forecast, the expectation is that Papa John’s revenue growth will slow down in FY24. Their expectation of a 2.8% increase in full-year is below its average growth rate of 6.9% in the past five years.
The analyst’s forecast is below the average forecast of other companies in the same category, which is projected at 9.5% on an annualized basis. Based on these figures, it is clear that Papa John’s is expected to perform below its industry.
On a positive note, there was no change to PZZA stock’s average price target. It implies that analysts do not expect any changes to the intrinsic value of the business. Consequently, the overall moderate buy rating is an accurate projection of the stock’s performance in the medium term.
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