On Friday, BMO Capital Markets adjusted its price target on shares of Papa John's International, Inc. (NASDAQ:PZZA), reducing it to $75 from the previous $80 while keeping an Outperform rating on the stock.
The adjustment follows the company's first-quarter earnings per share (EPS) of $0.67, which surpassed the consensus estimate by $0.10. This beat was attributed to stronger restaurant margins, reduced general and administrative expenses, and slightly higher supply chain profits, which helped to balance out weaker than expected North American comparable store sales (comps).
Papa John's reported that comps for the second quarter to date remained under pressure with a 1% decline. Consequently, the company has revised its 2024 comparable store sales and operating profit guidance downward and is in the process of re-evaluating its long-term targets. In response to these updates, BMO Capital has lowered its earnings estimates for the pizza chain.
Despite the reduced earnings outlook and the potential for share performance to be constrained in the near term due to the pressured trends, BMO Capital believes that the current valuation of Papa John's reflects significant negative sentiment.
The firm noted that the stock is trading at a lower multiple than would be expected if long-term targets are revised downward, suggesting that the challenges facing the company are more related to broader economic conditions than to structural issues within the company itself.
The revised price target reflects BMO Capital's assessment of these factors and their potential impact on the stock's future performance. Papa John's International, Inc. continues to navigate a challenging market environment as it adjusts its financial expectations and strategic goals.
InvestingPro Insights
InvestingPro data shows Papa John's International, Inc. (NASDAQ:PZZA) with a market cap of approximately $1.75 billion and a P/E ratio of 21.44, which is a key metric for investors to assess the company's valuation. Despite the challenges highlighted in the recent earnings report, Papa John's has maintained a dividend yield of 3.46%, showcasing a commitment to shareholder returns. Additionally, the company's gross profit margin stands at 30.77%, indicating a strong ability to retain earnings from sales after accounting for the cost of goods sold.
An InvestingPro Tip suggests that the stock is currently in oversold territory according to the RSI, which could hint at a potential rebound. Moreover, with the stock trading near its 52-week low, investors may be witnessing an attractive entry point, although caution is advised given that five analysts have revised their earnings downwards for the upcoming period. For those seeking further insights, there are additional InvestingPro Tips available, including analysis on the company's short-term liquidity and earnings growth prospects.
To explore these insights in greater detail and to discover more about Papa John's financials, visit https://www.investing.com/pro/PZZA. Remember to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With InvestingPro, you can access a wealth of information, including 11 additional tips to help you make more informed investment decisions.
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