Papa John's stock slips as earnings outlook needed a bit more 'better'

Better ingredients, better pizza -- great. Now maybe better earnings?

With its stock trading at a record high, at a valuation matching its peak of at least the last five years, Papa John's (PZZA) wasn't in any position for a misstep before its fourth-quarter earnings release. And a misstep arrived.

Granted, it wasn't a tremendous one at all, but the fact that management offered a somewhat slower-than-anticipated profit growth outlook for 2015 was enough to edge the shares downward Wednesday. Again, this really is a matter of good or very good projections, so it's entirely possible the "shortfall" will be forgotten soon enough. If the market keeps rallying, consumer discretionary stocks keep jumping and restaurants keep rising, Papa John's may well keep climbing.

For the day, it wasn't. Recently, Papa John's shares were lower by 1% at $64.64. Notably, that was much improved from the late session Tuesday, when the stock fell around 4% at one point. The downtick followed comments from the Louisville, Ky., pizza seller that it probably will earn $1.98 to $2.06 a share this year, up from $1.75 in 2014. Although that's a double-digit improvement, analysts were planning on $2.08, according to FactSet.

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"I never thought the Street would be unhappy with 13% to 18% growth, but I'll take that as a challenge and a compliment," John Schnatter, Papa John’s founder, CEO and commercial spokesman, regularly along with Peyton Manning, said on a conference call.

While the company said it had ample sales momentum -- full-year revenue growth is estimated at 3% to 5% from $1.6 billion last year and more in-line with the consensus view -- Papa John's believes earnings may be impacted by health-care costs, depreciation related to a new point-of-sale system, the stronger dollar and higher interest payments. (Regarding health care, Schnatter was among the business leaders who weighed in a couple of years ago on the Affordable Care Act, saying he thought it could increase food prices and perhaps mean fewer jobs.)

Meanwhile, the main numbers from the fourth quarter of last year all surpassed estimates. Papa John's earned 52 cents a share, on revenue of $425.5 million, with same-store sales up 4.1% at North American stores. Analysts were projecting per-share earnings of 50 cents, sales of $411.7 million and a comparable-sales gain of 1.4%.

Sales from company's commissary to franchisees rose 5.6% in the quarter. As with Domino's (DPZ), which also reported its results this week, sales from those supplies are a significant portion of revenue at Papa John's. Higher cheese prices were one of the contributors to the increase. Cheese prices are seen declining this year.

Papa John's had 4,663 locations at the end of 2014, including 3,340 in North America, but that total is continuing to build. In 2015, it plans to open 220 to 250 new stores, mostly outside the U.S. The current projection is for comparable-store sales to rise 2% to 4% in North America and 5% to 7% internationally.

Now we have to see if that's enough to convince investors, after today, to resume elevating the shares.