Papa John's 2Q22 preview: Short-term performance under pressure, medium- and long-term outlooks are constructive

As it pertains to PZZA's 2Q22e North American SSS result, Deutsche Bank believes that investors are currently expecting something in the ~flattish to +1.0% range, which is generally in line with to slightly below the current consensus estimate of +1.1%, and which compares to management's guidance of "slightly positive." Furthermore, investors are currently a bit cautious about the cadence of the trends throughout the quarter, such that there exists some caution around how the 3Q22e North American SSS result will ultimately fare versus the current consensus estimate of +2.4%. In addition, some investor cautiousness also exists around PZZA's company owned RLMs (as compared to consensus) over the next quarter or two, which is an important component of its overall consolidated operating margins (which is how management articulates its margin guidance, at present).

PZZA shares are down ~36.5% YTD, and sentiment and expectations have certainly come in materially from the various high points experienced throughout 2020 & 2021. Deutsche Bank thinks that any investor concerns that may exist for PZZA relate primarily to (potential) near-term results relative to consensus / management communication for 2022e; as opposed to anything relating to the true underlying fundamentals of the business or to the medium-term to longer-term growth outlook here. With Franchisor QSRs the preferred sub-segment of restaurants generally, with QSR Pizza thought to provide consumer value in tough economic times, with a high quality management team, with an arguably under-levered balance sheet, and with PZZA screening as an obvious takeout candidate within restaurants; there are a lot of reasons that one might want to be biased positive here.

Bloomberg's consensus estimate is revenue of $529.8M, adj. net income of $27.2M, and adj. EPS of $0.746.