Papa Murphy's Holdings Q4 Earnings Report: How Bad?


The Q4 earnings report for small cap Take 'N' Bake pizza chain stock Papa Murphy's Holdings (NASDAQ: FRSH) is scheduled for after the market closes on Wednesday (March 15th). In February, our Under the Radar Movers newsletter suggested shorting the stock by saying:

“For the longest time, Papa Murphy's Holdings managed to make its way sideways in a pretty narrow trading range. As of today though, a support line at $4.16 has been broken, and a high-volume pullback that's been developing since late last week has been unleashed. There's not a lot left to prop the stock up, and there's plenty of downside room to keep rolling.”


“What you can't see on the chart is that, further back, FRSH had already developed a pretty significant long-term downtrend. We're just trying to capture a brief leg of that bigger-picture pullback.”

In early January, Papa Murphy's Holdings had announced preliminary, unaudited sales results for the fourteen-week fourth quarter and fifty-three week fiscal year ended January 2, 2017 with the Chair of the Board and Interim CEO stating:

"While we are disappointed that our fourth quarter sales remained under pressure, we continue to execute against long-term strategic initiatives, such as the launch of our online ordering platform, the refranchising of company stores, and our first ever national ad campaign which debuts in the first quarter of 2017. While the environment remains competitive, we believe these initiatives, along with our return to traditional marketing messaging and a focus on new product innovation will drive positive results in the future."


A technical chart for Papa Murphy's Holdings seems to indicate that shares bottomed in early November only to drift back towards that level in recent trading: 

A long term performance chart shows shares of Papa Murphy's Holdings and pizza chain operator Rave Restaurant Group (NASDAQ: RAVE) giving a mirror performance while Papa John's International, Inc (NASDAQ: PZZA) had a reversal early last year and possibly again this year:


In early November, Papa Murphy's Holdings reported that third quarter revenue increased 1.4% to $28.5 million while domestic system comparable store sales decreased 5.8%, including a 5.6% decrease at domestic franchisee-owned stores and a 7.7% decrease at company-owned stores.

  Three Months Ended
  September 26, 2016   September 28, 2015
Domestic comparable store sales:      
Franchised stores -5.6 %   1.5 %
Company-owned stores -7.7 %   0.0 %
Combined -5.8 %   1.4 %
       
System-wide sales ($'s in 000s) $ 199,318     $ 203,078  
       
Adjusted EBITDA ($'s in 000s) $ 4,812     $ 6,144  
       
Store Count      
Franchised 1,375     1,340  
Company-owned 166     126  
International 41     34  
System-wide 1,582     1,500  

 

The net loss was $421,000 versus net income of $1.12 million.

The CEO commented:

"We had a disappointing quarter, as the increasingly competitive environment, both in the pizza category and more broadly, magnified the effects of lower absolute media levels in this Presidential election year.  In spite of the near-term challenges, we believe our long-term strategies, including appropriate new store openings, continue to be on point and will drive top line growth and profitability going forward, for both our franchisees and shareholders."


"With the support of our franchisees, we will launch our first ever national advertising campaign in 2017, with at least six full weeks of national television advertising.  This marks an inflection point in the history of our company and our brand and will increase our level of media across most of our markets.  We consider this to be a significant step forward in creating a truly national brand.  And, not only do we believe national media to be an effective driver of pizza sales, we also expect increased brand awareness to have a positive impact on franchise sales.  We are committed to delivering long-term growth and believe this acceleration of our long-term national brand strategy will drive sales momentum and growth going forward."


Finally, here is a quick recap of small cap Papa Murphy's Holdings recent earnings history along with EPS estimate trends from the Yahoo! Finance analyst estimates page:

 12/31/20153/31/20166/30/20169/30/2016
EPS Est. 0.12 0.13 0.05 0.05
EPS Actual 0.16 0.04 0.06 -0.03
Difference 0.04 -0.09 0.01 -0.08
Surprise % 33.30% -69.20% 20.00% -160.00%
EPS TrendCurrent Qtr. (Dec 2016)Next Qtr. (Mar 2017)Current YearNext Year
Current Estimate 0.02 -0.09 0.09 0.09
7 Days Ago 0.02 -0.09 0.09 0.09
30 Days Ago 0.02 -0.09 0.09 0.06
60 Days Ago 0.03 -0.1 0.1 0.08
90 Days Ago 0.03 -0.05 0.1 0.08

 

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