Domino's or Papa Johns: Which Won the Pizza War of the First Quarter?

Domino's Pizza (NYSE: DPZ  ) and Papa John's International (NASDAQ: PZZA  ) are two of the largest pizza delivery and carryout companies in the world, with over 15,000 locations between them that serve millions of people each day. Both companies have recently reported their first-quarter earnings, so let's compare the companies' results and outlooks on the rest of fiscal 2014 to determine which had the stronger quarter and could provide the highest returns for investors going forward.

Breaking down the delicious results

Source: Domino's Pizza

Domino's released its first-quarter report on May 1 and the results satisfied the consensus analyst estimates; here's a breakdown and year-over-year comparison:

Metric Reported Expected
Earnings Per Share $0.68 $0.68
Revenue $453.90 million $444.91 million

Source: Benzinga

  • Earnings per share increased 15.3%
  • Revenue increased 8.7%
  • Same-store sales data:
    • Domestic company-owned stores: 1.5% increase
    • Domestic franchised stores: 5.2% increase
    • Total -- domestic stores: 4.9% increase
    • International stores: 7.4% increase
  • Operating profit increased 11.5% to $84.18 million
  • Operating margin expanded 50 basis points to 18.6%
  • Repurchased 221,481 shares of its common stock for approximately $15.13 million
  • Paid $11.05 million in dividends 
  • Expansion update: Domino's opened 123 new locations and closed 21 existing locations during the quarter, bringing its total store count to 10,988 worldwide.

Source: Papa John's

On May 6, Papa John's released its first-quarter report and the results were mixed compared to the consensus analyst estimates; here's a breakdown and year-over-year comparison:

Metric Reported Expected
Earnings Per Share $0.45 $0.46
Revenue $401.38 million $384.91 million

Source: Benzinga

  • Earnings per share increased 7.1%
  • Revenue increased 12.9%
  • Same-store sales data:
    • Domestic company-owned stores: 11.4% increase
    • North American franchised stores: 8.9% increase
    • Total -- North American stores: 9.6% increase
    • International stores: 6.4% increase
  • Operating profit increased 8% to $32.00 million
  • Operating margin contracted 30 basis points to 8%
  • Repurchased 651,000 shares of its common stock for approximately $32.8 million
  • Paid $5.24 million in dividends
  • Expansion update: Papa John's opened 46 new locations and closed 36 existing locations during the quarter, bringing its total store count to 4,440 worldwide.

What should you expect for the rest of fiscal 2014?

Source: Domino's Pizza

Domino's does not provide quarterly or annual guidance, but it does provide what it calls its "long range outlook," which it says is "appropriate and achievable over the long term." The company did not release anything about this outlook in the first-quarter report, so I believe it is safe for investors to assume the outlook provided in the fourth quarter still stands; here's a summary:

  • Domestic same-store sales growth in the range of 2%-4%
  • International same-store sales growth in the range of 3%-6%
  • Global revenue growth of 6%-10%
  • Net unit growth of 4%-6%
This is a solid set of long-term goals. However, for comparison's sake, the current consensus analyst estimates call for earnings per share of $2.84 and revenue of $1.91 billion in fiscal 2014, which would represent year-over-year increases of 15.9% and 6%, respectively; Domino's appears to be on pace to satisfy these estimates.

Source: Papa John's

Following its strong first-quarter results, Papa John's simply stated, "The company is reaffirming all 2014 guidance." Here's a summary of this guidance, which can be found in its fourth-quarter report released on Feb. 25:

  • Adjusted earnings per share in the range of $1.72-$1.80
  • Revenue growth in the range of 5%-7%
  • North American same-store sales growth in the range of 2%-4.5%
  • International same-store sales growth in the range of 5%-7%
  • The openings of 220-250 new stores
This outlook calls for the company's earnings per share to increase 11%-16.1% from the $1.55 per share it earned in fiscal 2013 and would bring revenue to over $1.5 billion for the year. With the first-quarter results factored in, it appears that Papa John's is on pace to achieve all of these expectations.

Source: Domino's Pizza

And the winner is...
After reviewing the companies' earnings results and outlooks going forward, the winner of this match-up is Domino's Pizza; it was an incredibly close competition, but Domino's edged past Papa John's by showing very strong growth internationally and I believe its rapid expansion worldwide will continue to drive its earnings and revenues higher. However, this should not deter investors from Papa John's, because it posted incredible same-store sales growth and I believe it is well positioned to continue growing its global market share.

Foolish investors should strongly consider initiating positions in one of these pizza titans right now because both are trading well below their 52-week highs and trade at favorable forward multiples, so they represent picturesque buying opportunities.

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