If You Love Pizza Then You Will Love These Stocks

Pizza lovers can monetize their cravings by investing in pizza stocks. There are a couple of publicly-traded pizza companies that are profitable enough to give you good returns for your investments.

Pizza is a $40 billion industry that is very popular in the U.S. Of the 5 billion pizzas sold worldwide each year, about 3 billion pizzas are consumed in the United States. In fact, approximately 93% of Americans eat at least a slice of pizza every month, and every second there are about 350 slices of pizza consumed. There is no doubt that there's money in the industry, and publicly traded pizzerias are enjoying the growing appetite of many people, not only in the U.S but worldwide.

Key players in the industry

The pizza industry is largely dominated by the big three; Pizza Hut, from Yum! Brands (NYSE: YUM  ) , Papa John's International (NASDAQ: PZZA  ) , and Domino's Pizza (NYSE: DPZ  ) . Pizza Hut holds the top spot with 18% share of the market. Domino's Pizza is ranked second at 11%, while Papa John's Pizza enjoys 7% of the market share.

The industry leader

Pizza Hut is owned and operated by Yum! Brands, which is a well-diversified company that also owns two other famous brands--KFC and Taco Bell. For the second quarter of 2013, Yum! Brands reported that EPS declined by 16% year-over-year due to the significant reduction in sales and profits of its KFC division. KFC revenue and earnings were badly affected in China due to adverse publicity surrounding Avian flu.

But in the U.S., same-store sales grew 3% for KFC and 2% for Taco Bell. However, Pizza Hut sales declined by 2%. This is the third consecutive quarter that Pizza Hut reported declining U.S. same-store sales. In both the fourth quarter of 2012 and the first quarter of 2013, sales of Pizza Hut declined 1% sequentially.

Nonetheless, Pizza Hut remains a dominant market leader in the industry with a very expansive global footprint. In 2012, the company added 259 new outlets; 38 in the U.S. and 221 in international locations. By the end of 2012, Pizza Hut had 11,912 outlets, and the number continues to grow month-over-month. 

The leader in pizza delivery

If you're contemplating securing a position in the pizza industry, then Domino's Pizza should be at the top of your list. Domino's Pizza is not only a market leader in pizza delivery in the U.S., but it is growing fast as well. In fact, the company just recently reported its 78th consecutive quarter of international same store sales growth at 5.8%. Its global net store count grew by 110 new outlets.

Diluted EPS for the quarter jumped 21.3% from 47 cents to 57 cents a share, or an increase of 10 cents from the year-ago quarter. The company also reported improved revenue, up by 10.1%. Likewise, net income was also up 18.4% versus the prior year quarter. Same-store sales in the U.S. grew nearly 7%, while international same-store sales rose nearly 6%.

Same-store sales growth was also driven by its industry-leading digital ordering system, which was warmly embraced by millions of customers worldwide. Last year, its digital ordering system mobile app was downloaded more than 6 million times, and it added more than $2 billion in global sales.

As of March 2013, Domino's Pizza has a total of 4,923 domestic stores and 5,407 international stores, or a total of 10,330 outlets. By June the store count had increased to 4,932 domestic stores and 5,508 international stores, or a total of 10,440 stores.

Clearly, the gap between Domino's Pizza and Pizza Hut's total global outlets is getting smaller. At the current growth rate of both companies, Domino's Pizza will soon overtake Pizza Hut in terms of store count, and market leadership will probably follow suit. In terms of share performance, it outperformed the industry leader with commanding 37.12% YTD growth.

Number one in customer satisfaction

When it comes to satisfying customers, Papa John's Pizza is at the top spot. The American Customer Satisfaction Index (ACSI) released on June 19 the result of the customer satisfaction survey among national pizza chains, which showed that Papa John's beat all other pizzerias in the U.S. This is the 14th consecutive year that the company was given such high rating. Papa John's serves and delivers not just superior quality pizzas, but it also provides industry-leading services.

During the second quarter, Papa John's reached a new milestone when it opened its 1,000th international store. All-in-all, there were 55 international store openings during the quarter.

As of Dec. 30, 2012, Papa John's had 3,204 total North American outlets and 959 international outlets, or a total of 4,163 stores. After six months ending June 30, the numbers improved to 3,242 total North America stores and 1,010 international stores. 

Papa John's earnings were up 30.5% from 59 cents in Q2 2012 to 77 cents per share in Q2 2013. Because of solid quarterly performance, management raised its full year EPS guidance to $2.92 to $3.00 per share from the previous guidance of $2.90 to $3.00 per diluted share. On the trading floor, shares of Papa John's Pizza jumped 26.62% this year.

The bottom line

Pizzas will continue to appeal to the palate of many Americans, and people from all over the world love this food as well. Demand is growing each year, fueling growth of many pizzerias around the world, especially the big three. By securing a position in the industry, you will enjoy not just the pizza but earnings from your investment in the pizza companies above.

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