On Friday, Benchmark, a financial analyst firm, adjusted its price target for Papa John's International Inc. (NASDAQ:PZZA) shares, reducing it to $75 from the previous target of $87. The firm, however, has sustained its Buy rating for the pizza company's stock.
Papa John's reported its first-quarter earnings for 2024 on Thursday, May 9, which fell short of market expectations. The company's revenue for the quarter was $176 million, missing the consensus estimate of $183 million. This shortfall was attributed to a decline in same-store sales (SSS) in the U.S., which dropped by 1.8%, slightly under the anticipated 1.7% decrease.
Despite the revenue and SSS disappointments, Papa John's managed to exceed profit expectations, thanks to better-than-expected margins at both company-owned stores and commissaries. These margins benefited from lower commodity costs, particularly for cheese and dough. Additionally, the company saw a financial gain from the reversal of equity rewards previously granted to its former CEO, Rob Lynch.
This combination of factors led to an adjusted operating margin of $43.2 million, surpassing the consensus forecast of $37 million. Adjusted earnings per share (EPS) also beat expectations, coming in at $0.67 compared to the anticipated $0.57.
Benchmark's revised price target of $75 for Papa John's reflects a new valuation multiple. The firm now applies a 13x multiple on its fiscal year 2025 EBITDA estimate for the company, which has led to the lowered target despite maintaining a positive outlook on the stock's performance.
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