Domino's Pizza Inc. DPZ is off to a strong start in 2015. This leading pizza company posted solid first-quarter 2015 results with earnings and revenues beating the Zacks Consensus Estimate.
While the company’s earnings have beaten the consensus mark consistently since the beginning of 2014, except once, revenues have beaten the same throughout the same time frame. Over the trailing four quarters, the company has posted average positive earnings surprise of 1.37%.
While earnings improved 19% year over year in the first quarter of 2015 driven by strong comps, margins and lower share count, quarterly revenues went up 10.6% on solid comps. Higher supply chain revenues due to better sales volumes and store growth also aided the top line.
Domestic as well international comps grew significantly year over year as well as sequentially. The upside caught investors’ attention and share price of the company hit a new 52-week high on Apr 23. (Read: Domino's Tops Earnings on Comps, Shares Hit 52-Week High)
This Zacks Rank #2 (Buy) stock has gained about 21.2% year-to-date compared with the S&P 500’s gain of only 2.9%.
How Does Domino's Keeps Pace with the Broader Index?
Domino’s Pizza has undertaken several brand revitalization initiatives such as menu innovation, store expansion and re-imaging of existing stores to drive its revenues.
Meanwhile, in order to expand its brand in the domestic market as well as overseas, the company is capitalizing on digital technology. Notably, approximately 50% of its U.S. sales come via digital platforms and 40% from international markets.
As a matter of fact, growing demand for pizza is driving comps of the company. Per Franchise Disclosure Documents, if Americans could choose to eat only one food for the remainder of their lives, it would be pizza. Per its data, people in the U.S. eat on an average 100 acres of pizza daily or 350 slices per second on an average.
Notably, 93% of the Americans eat at least one pizza per month. With such mass appeal, it is no surprise that this $40 billion industry — in terms of sales — makes up approximately 17% of all restaurants in the nation.
However, the industry has its share of challenges given stiff competition and increase in health consciousness among consumers. Despite these obstacles, while pizza lovers satiate their cravings for yummy cheesy pizzas, investors can make hay while the sun still shines on the industry. While Domino's Pizza has posted its results, here are some more pizza stocks that are yet to report their quarterly results.
Papa John's International Inc. PZZA operates and franchises pizza delivery and carryout restaurants. The company’s earnings and revenues have beaten the Zacks Consensus Estimate over the past two quarters. Over the trailing four quarters, the company has posted an average positive earnings surprise of 1.74%. The company presently has a Zacks Rank #3 (Hold) and has long-term expected earnings per share growth rate of 15.75%.
Papa John is also investing heavily in technology-driven initiatives like digital ordering to boost sales. Papa John's has been delivering positive comps domestically as well as in the international markets over the past few quarters. The company’s brand revitalization initiatives such as unit expansion and international expansion have contributed significantly to its comps growth.
Moreover, the company is investing in labor and other resources related to the rollout of its new in-store operating system ‘FOCUS,’ which would be beneficial over the long term. The company will report its earnings next month.
Papa Murphy's Holdings, Inc. FRSH is a high-growth franchisor and operator of the largest Take ‘N’ Bake pizza chain in the United States, selling uncooked pizzas that customers bake at home. The company that began trading on Nasdaq in May 2014 currently has a Zacks Rank #2 and has long-term expected earnings per share growth of 16.25%. The company is set to post its first quarter 2015 results on May 6, 2015.
So far, the company has reported three quarterly results wherein it beat the Zacks Consensus Estimate for earnings twice and has an average positive earnings surprise of 16.24%. Papa Murphy’s offers customers an opportunity to create fresh and customized pizza with high-quality ingredients at stores or online, take a fresh pizza home and also bake a pizza in their ovens, at their convenience, for a home-cooked meal served hot.
Another company, RAVE Restaurant Group, Inc. RAVE that was known as Pizza Inn Holdings, Inc. til Jan 2015 will report its first earnings soon. The company offers individual handcrafted pizzas with fresh ingredients made to order in less than five minutes through its subsidiaries, Pizza Inn, Inc. and Pie Five Pizza Company, Inc.
Moving Forward
We need to wait and see how these stocks fare in their upcoming releases. However, as long as the companies continue to look after consumer preferences, innovate their menu and implement their digital strategy, the pizza industry should thrive in the future. Despite a few challenges, the industry is expected to grow. An improved economy backed by lower unemployment rates and increasing disposable income of consumers is expected to fuel demand.
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