By William Trent, CFA of Stock Market Beat

Small Cap Watch List and Mid Cap Watch List member Papa John’s International (PZZA) reported earnings last night. Highlights:

# Fourth quarter earnings per diluted share of $0.59 in 2006 vs. $0.42 in 2005 ($0.55 in 2006 vs. $0.36 in 2005, excluding the consolidation of the company’s franchisee-owned cheese purchasing entity, BIBP Commodities, Inc. (BIBP))

# Fourth quarter 2006 earnings includes a $0.07 benefit from a 53rd week of operations and a $0.05 benefit from the settlement of certain tax issues

# 37 net Papa John’s restaurant openings during the quarter and 89 for all of 2006

# Domestic system-wide comparable sales decreased 0.5% for the quarter and increased 3.1% for the year

# Earnings guidance for 2007 reaffirmed at a range of $1.48 to $1.56 per diluted share, excluding the impact of consolidating BIBP’s results

# Board of Directors approved a $50 million increase to an aggregate of $675 million for repurchases of the company’s common stock

Yahoo reports the consensus estimate at $0.46, comparable to $0.36 in 2005. Since the $0.36 excludes BIBP, the extra week and the tax settlement, it looks like apples-for-apples the earnings report missed by $0.03. That thesis is further reinforced by the “reaffirmed” full-year guidance, which now looks to be made on a gooey dough of share buybacks.

The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Union Pacific (UNP) put options; Air Products (APD) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Three Five Systems (TFS); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Landstar (LSTR) put options; Plantronics (PLT) put options

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