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Why Papa John's Shares Got Burned

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Papa John's (NASDAQ: PZZA  ) were looking stale today, falling as much as 12% after the pizza chain missed earnings estimates in its quarterly report and restated previous earnings.

So what: Papa John's said it made an adjusted profit of $0.62, below expectations $0.75 and down from a total of $0.65 a year ago. Revenue grew 20% to $367.3 million, topping expectations, as it benefited from an extra week in the calendar year. Comparable sales were up 5.2% in North America and 7% internationally.

Because of an accounting error related to a joint venture, Papa John's said it was forced to restate earnings going back to 2009, which resulted in the net loss of $0.15 per share in past earnings.

Now what: Though the company missed earnings estimates, $0.11 was taken out for the extra calendar week. I wouldn't be too concerned about the problem going forward, as revenue is still growing at a strong pace. The earning restatement is not particularly severe, and the issue seems to be under control now. Today's drop seems exaggerated; investors may want to take advantage of the pullback.

Find out what's next for Papa John's. Add the company to your Watchlist by clicking right here.  

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Related Tickers

9/30/2016 4:00 PM
PZZA $78.85 Down -0.40 -0.50%
Papa John's Intern… CAPS Rating: ****