For Those Who Baked, Brewed or Fried, We Salute You

Jeff is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

What do a billion chicken wings, a billion beers, and several million pizzas have in common? They all get consumed on a single Sunday in February. According to the National Chicken Council, almost one and a quarter billion chicken wings were eaten during Super Bowl weekend.  Nielson Research reports that over 49 million cases of beer were sold in the two weeks leading up to the big game.  And scuttlebutt has it that the 30+ minute power outage likely INCREASED sales above the four million pizzas expected to have been ordered throughout the day.  Estimates are that over 111 million people watched the Super Bowl. If the trailing three year trend holds, more pizza, beer, tacos, and wings were devoured during the delicious debauchery than in any year past.

Four basic food groups:  Pizza, Tacos, Wings and Beer.

Domino's Pizza (NYSE: DPZ) staffed its headquarters with IT professionals and others just in case some glitch happened to keep them from providing the 11 million slices of pizza they anticipated selling on Sunday.  Whereas Papa John's remains focused on the domestic market, Domino's is expanding their reach overseas at a dramatic pace, especially in India.  Domino's has done well in India, opening over 440 stores. Those Indian locations have led to five years of double-digit percentage same-store sales growth.  The company says it has the possibility of having at least 1,000 outlets in India. 

Taco Bell, part of Yum! Brands (NYSE: YUM), unveiled a new unforgettable character encouraging all of us to "LIVE MÁS." This time it wasn't a Spanish speaking Chihuahua, but rather an 87-year-old and his friends showing us that anyone can LIVE MÁS. 

KFC, another under the YUM! umbrella, promoted its "Game day Bucket" in the days leading up to the game. The $19.99 limited-time offer provides eight pieces of chicken, eight Hot Wings, and ten Original Recipe Bites. The company is also marketing itself as the official sponsor of "couchgating."  KFC has been in China for some time and has thousands of stores there, but recent results indicate YUM! in China may not be living so MÁS.  Recently YUM! reported a 6 percent drop in fourth-quarter sales at established restaurants in China due to "adverse publicity" regarding chemical residue found in some of its chicken supply.  Results had suffered in January, with KFC same-store sales dropping 41 percent.

Not to be outdone either in sales or sensationalism, Anheuser-Busch InBev SA/NV (NYSE: BUD)  introduced one of their new stars, a baby Clydesdale born Jan. 16.  The foal, to be named by fans, was featured in the traditional 60-second Clydesdales commercial during the game.  With the big game over, BUD can return to focusing on the more mundane--namely its pending acquisition of Grupo Modelo and working out an agreement with the U.S. Dept. of Justice to avoid an anti-trust battle.

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 (NASDAQ: PZZA). 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.

<img src="/media/images/user_15196/pzza-daily_large.png" />

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.

<img src="/media/images/user_15196/pzza-feb-2012_large.png" />

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

<img src="/media/images/user_15196/may-2012_large.png" />

... 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.


jcbinkley has no position in any stocks mentioned. The Motley Fool owns shares of Papa John's International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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