Why Did Papa John's Stock Crash After Earnings?
Key Points
Papa John's beat sales and earnings forecasts this morning.
The company also said it's not for sale, though, and investors weren't happy to hear that.
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Pizza chain Papa John's (NASDAQ: PZZA) stock crashed 15.9% through 1:25 p.m. ET Thursday despite beating analyst forecasts for Q2 earnings this morning.
Analysts had expected Papa John's to earn $0.44 per share on $482 million in sales, numbers the company edged out when it reported $0.46 per share in profit and $482.4 million in sales.
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So why are investors disappointed today?
Image source: Getty Images.
Papa John's Q2 earnings: by the numbers
Sales beat expectations, but nonetheless declined 5% year over year, with same-store sales down closer to 6%. (A net of 41 new restaurant openings in the quarter explained the difference.)
Earnings were even worse. Although Papa John's beat expectations here, too, the "$0.46" profit noted above was only a pro forma figure. Earnings calculated under generally accepted accounting principles (GAAP) were barely half that -- $0.24 per share -- and down 14% from last year's Q2.
Accentuating the positive, Papa John's emphasized its 1.5% increase in same-store sales for its international business (which makes the 9% decline in comps among North American restaurants look even worse).
What's next for Papa John's stock?
None of the above is what really upset investors, however. Knowing that Papa John's has been a buyout candidate for Qatari-backed Irth Capital Management, investors were hoping for a quick payout and a nice premium should Papa John's accept the Qatari offer. Today, management dashed that hope, confirming that Papa John's has decided to remain independent and try to turn its business around on its own.
"While our transformation is taking longer than anticipated," explained CEO Todd Penegor, "we continue to execute our strategy with discipline and focus and are seeing encouraging progress." Unfortunately, to pay for that progress, Papa John's is also suspending its dividend effective next quarter.
Cue sell-off.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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