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Papa John's cut at KeyBanc on longer road to recovery


Investing.com — KeyBanc Capital Markets downgraded Papa John’s International (PZZA) from Overweight to Sector Weight on Thursday, citing a prolonged path to recovery for the pizza chain. 

The downgrade comes after the firm’s participation in the Restaurant Finance & Development Conference in Las Vegas, where discussions with industry executives revealed that Papa John’s recovery in sales and profitability may take longer than expected.

“Following a series of meetings with key stakeholders, we believe the road to a sales and profit recovery in the domestic business could be longer and windier than previously expected,” said KeyBanc.

In its note, KeyBanc analysts highlighted that despite “modest improvement in recent SSS trends,” the brand faces a difficult quarter ahead. 

“The 4Q is shaping up to be another difficult period for the brand,” the analysts stated, adding that the improvement in same-store sales (SSS) is largely due to broader industry recovery and a $3.5 million advertising push by the company in late October. 

However, this initiative also suggests that “fixing Papa Johns may require additional co-investment,” potentially necessitating changes to its “Back to Better 2.0” strategy.

The bank pointed out that this strategy, which had already reduced franchisee contributions to advertising, could require a reversal to generate more support for the brand. 

Moreover, they believe adjustments to supply chain commissions could weigh heavily on Papa John’s financials, further complicating the recovery process.

Despite these challenges, KeyBanc remains optimistic about the company’s new leadership team, which includes former Wendy’s CEO Todd Penegor. 

The firm also sees potential in Papa John’s new loyalty program to drive incremental visits. However, with a current stock valuation of 21x 2025 EPS, well above peers like Wendy’s and Restaurant Brands (NYSE:), KeyBanc expressed concern about the company’s near-term earnings growth potential.

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KeyBanc lowered its 2024 and 2025 earnings-per-share estimates to $2.20 and $2.38, respectively, citing “more conservative sales and margin assumptions.”





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