For Those Who Baked, Brewed or Fried, We Salute You: Domino’s Pizza, Inc. (DPZ), Yum! Brands, Inc. (YUM)

And Papa John’s Pizza again gave away millions of pizzas to lucky winners who correctly called the opening coin toss. Which brings me to the subject I want to talk about. It’s a subject most men will drop all others to discuss: food, specifically pizza.  Personally, I like pizza. And for that matter, I like Papa John’s Int’l, Inc. (NASDAQ:PZZA)‘s . Their pizza is good and their results as an investment continue to please as well.  I’m not alone in my appreciation for them.

Everybody likes PZZA.

Based out of Louisville, Kentucky, Papa John’s is the third largest pizza company in the world behind Pizza Hut and Domino’s. But in consumers’ minds, at least for 11 of the past 13 years, it has been number one in customer satisfaction according to the American Customer Satisfaction Index (ACSI). Its brand is valued as well, earning the 2012 Harris Poll EquiTrend Pizza Brand of the Year. Papa John’s has also effectively marketed itself as the Official Pizza Sponsor of the National Football League and Super Bowl XLVII, ending the season with the highly anticipated coin toss promotion.

Already a strong team…

The company continues to perform well. This past November it raised fiscal 2013 guidance for diluted earnings per share (EPS) and international comparable sales. The company expects diluted EPS of $2.53 to $2.63 and international comparable sales of +6.0% to +7.0%. According to I/B/E/S Estimates, analysts are on average expecting the company to report EPS of $2.60 for fiscal 2012.   It also has an aggressive plan to continue to take market share away from its competitors.  It is looking to open an additional 1,000 domestic and 3,000+ international locations with modest additional investments.

Performance as an investment hasn’t been too shabby either, with the stock price moving up almost 55% from its 52-week low last February.

A word of caution, however; the stock does appear to be quite earnings sensitive, moving substantially lower after the February 2012 release of Q4 and full year earnings.

Then promptly after the May 2012 positive surprise (+$.14 above estimate), the stock moved dramatically higher.

… and recruiting new talent.

Management is not comfortable resting on its laurels. An aggressive development plan for the company was announced late in 2012, with new franchisee benefits including:

  • No franchise fee ($25,000 value)
  • $50,000 in equipment, including two Middleby-Marshall ovens, which may be purchased by the franchisee for $50 after operating for three years
  • A royalty waiver for up to 18 months
  • A $3,000 food credit with PJ Food Service, which operates Papa John’s fresh dough and food distribution quality control centers, for each restaurant that opens at least 30 days prior to the scheduled opening date

With this aggressive growth campaign, a history of positive earnings surprises, consumers consistently naming it number one, and now raising earnings guidance, I like PZZA.

The article For Those Who Baked, Brewed or Fried, We Salute You originally appeared on and is written by Jeff Binkley.

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