Wall Street Hurls Tomatoes

In the most recent quarter, Papa John's (Nasdaq: PZZA  ) and its new Sicilian Meats pizza did little to satisfy Wall Street's appetite, and magical brownies didn't lead to new highs for Domino's (NYSE: DPZ  ) . Last night in after-hours trading, the stock market hurled tomatoes at yet another pizza purveyor; California Pizza Kitchen's (Nasdaq: CPKI  ) stock was off by more than 10% in recent trading.

Investors took little time to dump shares when management announced that fourth-quarter earnings would significantly lag previous guidance. The company now expects to earn $0.13 to $0.15 per diluted share, well shy of earlier projections that called for $0.25 to $0.27.

Fortunately, restaurant performance isn't to blame. As explained in CPK's quarterly earnings conference call, the primary culprit for the decline was an "unusual amount of development delays." Permitting issues and construction problems forced the company to push back the original timeline it had set for some of its new restaurant sites, which will cost CPK an estimated $0.06 per share in the fourth quarter.

Unfortunately, the news overshadowed an otherwise tasty third quarter. Net sales increased 14.7% year over year, with same-store sales contributing a healthy 5.6% increase. Menu additions and customer satisfaction were two reasons offered for the positive results.

Another nice highlight came from its frozen pizza segment. California Pizza Kitchen now has a 5% share of the frozen pizza market, up from 3.5% this time last year. Management is particularly pleased, since the increased market share expands its relationship with Kraft (NYSE: KFT  ) , giving it more options to try other ventures with the cheese king.

Finally, if you can overlook the development hiccup in the fourth quarter, the pipeline of new restaurants for California Pizza Kitchen still remains very much intact. The company is calling for restaurant revenue growth of 19% to 20% in FY 2007, with much of this increase coming from new stores, including 16 to 18 full-service sites, six to seven ASAP locations, and one LA Food Show.

California Pizza Kitchen was tripped up in the short term, but the company's bigger picture still looks solid. Investors, if you're interested in this concept and have a long-term investment horizon, Wall Street was kind enough to give you a nice little discount today.

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Fool contributor Jeremy MacNealy has a player rating of 98.01 and is ranked 250 out of 12,508 participants at Motley Fool CAPS. He has no financial interest in any company mentioned. The Motley Fool has a nifty disclosure policy.

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