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Papa John's tepid second-quarter earnings report on Tuesday wasn't enough to deter shareholders on Wednesday.
Shares of the company spiked 12.5 percent after the company said that it was raising its leverage over the next 12 months and would be repurchasing $500 million in shares.
"The stock is likely to react favorably when Wednesday's trading begins, as investors generally have been asking for — but not anticipating — Papa John's to raise its leverage ratio by more than it has done in recent years," Mark Kalinowski, a Nomura-Instinet analyst, wrote in a research note Wednesday morning before the opening bell.
The company is expected to boost its leverage to between 3 and 4 times its earnings before interest, taxes, depreciation and amortization, up from about 1.3 times.
The aggressive $500 million buyback accounts for about 19 percent of the company's outstanding shares and is likely the largest factor in the stock jumping Wednesday, Will Slabaugh, a Stephens analyst, told CNBC.
The company's recapitalization plans overshadowed Papa John's muted earnings.
"The fundamentals of the quarter were mostly in line with what I think were subdued investor expectations going into the quarter," he said.
Net income rose to $23.5 million, or 65 cents per share, up from $22.5 million, or 61 cents per share, in the year prior. Papa John's revenue rose to $434.8 million, up from $423 million last year.
While the company outpaced analysts' expectations of earnings of 64 cents per share, the pizza giant fell short of the $439 million revenue forecast.
In addition, the company said same-store sales in North America grew 1.4 percent during the quarter, shy of Wall Street's expectation of growth of 1.8 percent, according to StreetAccount. International same-store sales also disappointed, with growth of 3.9 percent in the quarter falling short of analysts' expectations of same-store sales growth of 5 percent.
"We remain buyers of Papa John's on what we see as one of the most attractive multi-year stories in restaurants with significant international unit-growth opportunity and untapped customer data tools in its online ordering and loyalty platforms," Slabaugh wrote in a research note Wednesday.