Pies in the Sky

It was a good week for pizza lovers. Papa John's (Nasdaq: PZZA  ) , Pizza Inn (Nasdaq: PZZI  ) , and even California Pizza Kitchen (Nasdaq: CPKI  ) cracked open their pizza boxes long enough for investors to savor the toppings for their latest quarters.

Yes, I said toppings. The reports were typically better than expected, especially for a sector that seems to go hot and cold about as often as a pie sliding in and out of the oven.

The upbeat vibe is a welcome surprise to those who caught a pie in the face from Domino's Pizza's (NYSE: DPZ  ) quarterly results last month. Shares of the pizza delivery giant got slammed after the company posted a 55% drop in earnings, on a slight dip in domestic comps.

Then again, after the company's recapitalization strategy left it holding the bag on a ton of debt, it's not as if investors should have assumed that the weakness at Domino's would affect the rest of the industry.

As it stands, even Domino's isn't broken. On the international stage, comps have actually clocked in higher in each of the past 55 quarters. Only its domestic-sales shortcoming and its larger-than-expected interest-expense payments have weighed Domino's down.

So where does that leave us? Let's go on a pizza run.

Pizza Inn
The small 347-unit chain, known mostly for its lavish buffet spreads, posted respectable results on Monday. Revenue climbed 2.6% to $12.1 million, fueled by favorable comps. Earnings came in at $0.03 a share, but they would have been $0.06 per share before charges related to the departure of the company's CEO.

Unimpressed by the top line? Remember, only one of the 347 Pizza Inn locations is company-owned. For all the rest, Pizza Inn just sits back, collects royalties, and arranges food sales.

There are no analysts following the company, so we can't match performance to the market's expectations, but investors have to like what they're seeing. After watching annual revenue decline over the past few years, even as losses mounted, the company is growing again. It's also earned $0.045 and $0.065 per share in each of the past two quarters, respectively.

Papa John's
Better ingredients, better earnings report? Papa John's outdid rival Domino's in every facet of the game. Revenue rose by nearly 10% compared to last year, to $262.8 million. Excluding favorable tax credits, as well as a hit from the consolidation of a franchisee-owned cheese-buying facility, earnings climbed 11% to $0.31 a share. Domestic comps inched up marginally -- take that, Domino's!  

Papa John's is now raising its outlook, guiding investors to expect $1.64 to $1.68 per share in earnings for all of 2007. The report was strong enough to send Papa John's shares higher yesterday, bucking the trend of the weak market.

California Pizza Kitchen
The casual-dining chain that prides itself on thin pies with eclectic toppings had another strong quarter. Revenue climbed 14% to $162 million. Earnings rose to $0.25 a share for the quarter, before a one-time charge to close CPK's experimental quick-service ASAP concept. Analysts expected earnings to come in flat with last year's $0.23-per-share showing.

Comps climbed 3.5% during the quarter. The company also initiated its outlook for 2008, predicting $0.85 to $0.92 per share in earnings, on a 14% to 15% revenue gain.

Stacking up the pies
Now that we have plenty of earnings reports to digest, it's easier to get upbeat about the pie-tossers. We had a pair of conflicting reports last month: Domino's dropped, while Yum! Brands' (NYSE: YUM  ) Pizza Hut rose.

It was easy to wonder whether new technology would disrupt the industry. With TurboChef (Nasdaq: OVEN  ) installing its speedy convection ovens in chains like Subway and Starbucks (Nasdaq: SBUX  ) , adding pizza sales in non-conventional channels has become a breeze. Starbucks is unlikely to roll out latte-spiced pizzas, but Subway is already offering personal-sized pies along with its subs at many locations. Will the major pizza players' sales be cannibalized?

Well, it's not having an impact now. Everyone but Domino's took a small step forward this past quarter. So rejoice, pizza lovers. I guess you don't need a pizza oven to make dough rise.

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