Domino’s Earnings Bring Good and Bad News. The Stock Is Jumping.

Pizzas are prepared for a delivery order at a Domino’s restaurant in Trenton, Michigan. (Nic Antaya/Bloomberg)

Domino’s Pizza’s second-quarter earnings came in lower than expected even as the pizza chain delivered strong top-line growth, sending shares up in premarket trading.

For the three months ended in June, the pizza chain posted $1.15 billion in total revenue, marking a 4.3% growth from a year ago, as analysts had expected. Still, diluted earnings declined 5.5% to $3.81 per share, missing Wall Street expectations of $3.95.

The lower profit was primarily the result of a $27.4 million loss associated with the company’s investment in DPC Dash—the exclusive master franchisee for Domino’s Pizza in mainland China, Hong Kong, and Macau—and higher income taxes.

Shares were up 3.1% to $480 in premarket trading Monday.

Domino’s revenue growth was driven by strong sales at its thousands of franchised stores around the globe. Same-store sales improved 3.4% and 2.4% in the U.S. and international markets, respectively. It marks a comeback in the U.S. market from a 0.5% year-over-year decline in the first quarter.

The pizza chain also added a net total of 178 restaurants during the quarter. Global retail sales were 5.6% higher than in the year-earlier period, excluding the effects of changes in currency exchange rates.

“Our team delivered strong Q2 results,” said CEO Russell Weiner in a statement, “Internationally, we continued to grow despite macro challenges. In the U.S., both delivery and carryout grew, driving meaningful market share gains within the U.S. pizza QSR category.”

U.S. restaurants have had fewer customers as inflation and recession fears discourage people from dining out. While Domino’s has faced the same challenge, the company said it offers better value for customers than its rivals, which could help it grab market share.

“Our ability to offer sustained low prices and drive volume is something that nobody else has in the industry, at least in pizza,” Weiner told Barron’s in an interview after the company’s first-quarter earnings report in April.

Domino’s has worked with third-party apps like DoorDash and Uber Eats to have its pizzas listed on the ordering platforms, but delivered by Domino’s own drivers. This could help the chain attract more customers, while efficiently making use of its robust delivery network, the company said in the past.

Domino’s also continues to offer new products to remain competitive in the pizza world. In March, it launched stuffed-crust pizza, following in the footsteps of rivals Pizza Hut and Papa John’s .

“With what we believe are best-in-class unit economics, the largest advertising budget, a robust supply chain, and a rewards program that is bigger than ever, our business is well-positioned,” said the CEO.

Domino’s stock was up 7.1% year to date as of Friday’s close.

Write to Evie Liu at evie.liu@barrons.com