Papa John's Earnings: Operator Outpaces Pizza Pressure, India Development Prospects Intriguing

Narrow-moat Papa John's International reported solid quarterly earnings, with $527 million in revenue and $0.68 in adjusted EPS effectively in line with our $529 million and $0.69 estimates. Encouragingly, the firm maintained its guidance for 2%-4% U.S. comparable store sales growth in 2023, suggesting modest outperformance relative to its largest competitor, wide-moat Domino's. Further, a recently signed 650-unit development agreement in India should bear fruit, with a more value-oriented approach that focuses on delivering local market density and commensurately better four-wall economics looks more likely to bear fruit than the firm's previous foray in that market. On balance, we believe that those two factors are responsible for a 4% uptick in share prices during intraday trading, and we expect to raise our own $72 fair value estimate by a similar margin, with similar rationale. Shares continue to trade in a range we'd consider fairly valued.