Domino's Tasty Earnings Top Pizza Hut's Performance

Sometimes there's some serious dough to be made by buying into the pizza makers. Shares of Domino's Pizza (DPZ) soared 11 percent on Tuesday after it posted better-than-expected results.

Revenue climbed 10.5 percent to $446.6 million, fueled mostly by a 7.7 percent spike in comparable-restaurant sales. The big move in comps is strong on its own, but it's particularly impressive because one pie-tossing rival -- Yum! Brands' (YUM) Pizza Hut -- had posted a 1 percent decline in comparable-restaurant sales a few days earlier (and a slight decline in operating profit).

Things look even better on Domino's Pizza's bottom line, with earnings per share climbing 23.5 percent to 63 cents a share. A 16.3 percent surge in net income and ambitious share buybacks over the past year combined to drive the stellar profit showing.

Wall Street was too conservative. Analysts were only targeting net income of 61 cents a share on $434.8 million in revenue. Domino's has now beaten Wall Street's profit targets in three of the past four quarters. It's a strong performance given the competitive nature of the pizza-delivery business.

Everybody Wants a Slice

Selling pizzas can be a cutthroat affair. If one chain gets aggressive with discounting or introduces a hot new menu item, the competition needs to respond fast. This is why investors can't rely solely on sales growth as a measuring stick for a concept's success. Margins have to hold up, too, and clearly Domino's is shining on that front, with earnings climbing faster than sales.

Domino's has had success with the specialty chicken items it introduced during the second quarter. Rivals offer chicken wings and chicken tenders, but Domino's plan of dressing up its chicken bites by layering them with pizza toppings and baking them up is paying off.

Domino's is also experiencing an uptick in orders placed online, and folks ordering online tend to be bigger spenders. That makes sense. There's a big difference between ordering on the phone and seeing an entire menu displayed online.

It's Time to Make the Dough

We'll get a clearer snapshot of how the delivery pizza business generally is doing when Papa John's (PZZA) reports in a few weeks. It's a closer match to Domino's than Pizza Hut. All three specialize in pizza delivery and filling takeout orders, but Pizza Hut also offers stand-alone table-service restaurants.

The market made the connection between Papa John's and Domino's on Tuesday, sending shares of Papa John's nearly 5 percent higher on the strong Domino's report. Analysts were already holding out for Papa John's to see revenue and earnings per share climb 9 percent and 12 percent, respectively. Now they may be inclined to bump those estimates higher.

And we'll get yet another glimpse into the niche when Papa Murphy's (FRSH) reports a few days after Papa John's. Things haven't -- pardon the pun -- panned out for Papa Murphy's since the chain went public at $11 in May. The country's leader in the take 'n' bake pizza category (customers buy its gourmet pies to bake at home) is growing, but apparently not fast enough to satisfy investor appetites.

Motley Fool contributor Rick Munarriz 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. To read about our favorite high-yielding dividend stocks for any investor, check out our free report.