BTIG Still Buying Papa John's

Peter Saleh of BTIG reiterated his Buy rating on Papa John's Int'l, Inc. PZZA after the pizza restaurant operator's second-quarter earnings handily beat the Street view, leading the company to raise its full-year EPS estimate range by $0.05.

Papa John's second-quarter EPS of $0.61 was significantly above BTIG's $0.51 estimate and consensus' $0.54, "with the upside driven by stronger sales and lower G&A," the analyst said. Furthermore, comparable sales increased 4.8 percent system-wide in North America, above BTIG's 1.6 percent estimate.

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"We believe Papa John's results demonstrate the brand's ability to capture market share through digital engagement and quality positioning," Saleh said.

Saleh noted that the "encouraging" comp momentum indicates fading competitive pressures and expects the trend to continue as promotional activity recedes with recent increase in cheese prices.

Restaurant-level margin dropped 80 bps to 20.0 percent, driven by higher operating costs, and G&A declined 70 bps to 10.1 percent of sales.

The company raised its guidance for the year, with EPS at $2.35–$2.45 (up $0.05) and North America comps of 3–5 percent versus 2–4 percent previously.

Shares of Papa John's closed Tuesday's trading at $74.01, while Saleh has a price target of $78.

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