Earnings season has shown us the usual number of hits and misses, but also as usual, the beats and misses can largely be broken down into industries and groups. One of Q1's winning clusters of stocks with "more to the story" is a yummy one for eaters and investors alike: pizza.

TUTORIAL: Economic Indicators To Know

Take Domino's Pizza (NYSE:DPZ) for instance. The $0.42 per share it earned last quarter topped expectations by $0.08, and profits were up 12% compared to the same quarter a year earlier. The company credits a new recipe as the reason for the rising amount of dough.

Papa John's (Nasdaq:PZZA) followed suit, earning $0.64 per share versus the expected $0.60, on a 3.6% increase in total revenue. The figure was $0.02 stronger than Q1's from a year earlier.

Even though it's not a pure pizza play, Yum! Brands (NYSE:YUM) - owner of Taco Bell, Kentucky Fried Chicken and Pizza Hut - confirmed that pizza is still hot. Though the company as a whole struggled in the first quarter by falling a penny short of the expected per-share earnings of $0.64, Pizza Hut wasn't one of the problems. Indeed, Pizza Hut's same-store sales were up 12%.

The theme is clear - pizza is once again profitable and growing. In fact, the only outlier for that reality in Q1 appears to be California Pizza Kitchen (Nasdaq:CPKI), which saw its per-share profit sink 15% on a very slight dip in revenue.

The Two Keys to Pizza's Success
The numbers for the quarter, if mulled in a vacuum, don't necessarily mean a lot. Maybe college kids were just hungrier than usual last semester (which may partially explain why a higher-priced and self-proclaimed gourmet brand like California Pizza Kitchen did not rise). If you take a look at the trends these numbers are a part of, and really scour the details, there's something more telling for investors.

The first take-away: higher input costs have been contained. Rising food prices were expected to whack earnings margins, and all four pizzerias acknowledged it was an issue, with most of them proverbially heading them off at the pass. With that worst case scenario now baked in, investors can rest easier.

The second underlying theme here: international expansion has been critical to earnings growth for the pizza industry. Domino's reported that domestic same-store sales shrunk by 1.4% last quarter, while international same-store sales grew by 8.3%. Papa John's equivalent numbers were growth rates of 6.1% and 5.6%. Yum! Brands' Pizza Hut was the same story - overseas growth has been leading the way.

Care to guess who's missing a meaningful international presence? It's not the only reason for the struggle, but being almost entirely domestic hasn't helped California Pizza Kitchen or its bottom line.

The Bottom Line
Unfortunately, Yum! Brands' other two restaurant lines (Taco Bell and KFC) are diluting what would otherwise be compelling results. And California Pizza Kitchen doesn't really have any compelling results. That leaves Domino's and Papa Johns, but in this case, this two-horse race may well be won by investors of either. (For related reading, also take a look at 6 Companies Thriving In The Recession.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  3. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  6. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  7. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  8. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  9. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  10. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Fast Fashion

    Definition of "fast fashion."
  3. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  4. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  5. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  6. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!