Get a Piece of These Pizza Earnings

Talk about your half-baked pizza. Two major delivery chain competitors reported earnings yesterday, but only one came out piping hot. Domino's Pizza (NYSE: DPZ  ) went first, reporting before the open and so sorely disappointed investors that you'd think it mistakenly sent them an anchovy-laden pie instead of one with pepperoni. Papa John's (Nasdaq: PZZA  ) went later in the day, its results looking so appetizing that investors are sending shares up nearly 20% today.

Let's look at how each company performed in their most recent quarter. Maybe we'll discover that one or both are still a great buy, or otherwise find them a bit undercooked.

Pizza, pizza; results, results
The strange thing is that both companies saw generally positive trends. Domino's, as fellow Fool Matt Koppenheffer pointed out, saw earnings drop as a result of recapitalization costs. Without the extra charges, Domino's actually saw an improved bottom line and an uptick in same-store sales. Still, the Street turned up its nose at this earnings slice, which was slightly smaller than expected. Oh, you picky analysts.

Papa John's, on the other hand, delighted analysts who expected earnings of $0.55 per share with a reported $0.69 per share. The company only saw a 2% rise in net income from the year-ago quarter, but analysts must not have been expecting results to arrive in 30 minutes or less. Papa John's also clocked in with an impressive 8.4% rise in international same-store sales, compared to a rather anemic 1.1% growth in North America. That's a bit better than Domino's, which clocked in with 2% domestic same-store sales growth, but only 4.7% internationally.

Give me two with everything
Here's a little side-by-side of what both companies reported yesterday:

Metric

Domino's

Papa John's

Revenue $384.6 million $331.3 million
Net Income $20.7 million $16.7 million
Net Margin 5.4% 5%
Free Cash Flow $16.6 million $37.7 million
2012 EPS Guidance N/A $2.40 to $2.50
Total Sales Growth 6.1% 6.1%
Net Restaurant Openings 68 50
Current P/E 21 21

Source: Company earnings reports.

Despite the stock divergence, both companies actually reported very similar results. Both also remain neck and neck in valuation, so it's not as if either company pulled away as a better buy. However, both pure-play pizza chains are still less costly than their more diversified Pizza Hut competitor's parent, Yum! Brands (NYSE: YUM  ) . Domino's has better analyst love, though, with a mean price target that's higher than its current share price, unlike Papa John's, which shot past price targets today thanks to its outperformance.

Whether you're interested in picking up some shares or are simply after more information on your favorite pizza companies, you should add them both to your free watchlist. We'll send you all the news that you need to make informed decisions, with our signature Foolish twist:

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more news and insights. The Motley Fool owns shares of Papa John's International. Motley Fool newsletter services have recommended buying shares of Yum! Brands. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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