Papa John’s Earnings: Macro Headwinds Linger, but Long-Term Growth Algorithm Remains Alluring

Narrow-moat Papa John's International delivered unsavory fiscal 2023 second-quarter results—$515 million in revenue and $0.59 in diluted EPS trailed our $527 million and $0.71 estimates before the earnings call, respectively. Given the negative comparable store sales growth in its U.S. arm (91% of sales, down 1%), management guided to a flat to 2% full-year U.S. comp growth (from 2%-4%, previously), though this suggests sequential improvement in the back half of the year. Moreover, its long-term annual unit growth expectation (through fiscal 2025) was tempered to 5%-7% (from 6%-8%), and we intend to adjust our forecast into the guided range. All in, this should reduce our $77 fair value estimate by a low-single-digit percentage, leaving shares a touch overvalued.