What happened

Lancaster Colony (LANC -1.04%) stock was far outpacing the market in early trading on Thursday, jumping by 12.6% as of 11:20 a.m. ET compared to a 1% increase in the S&P 500. That surge helped put the specialty food products company above the wider market for the year. While the S&P 500 is still down by more than 12% so far in 2022, Lancaster Colony is down by less than 1%.

The day's gains were propelled by a well-received earnings report.

So what

Before the market opened Thursday, Lancaster Colony delivered its results for its fiscal 2022 fourth quarter, which ended June 30. Sales rose 17% to a record $452 million in the period, driven by a 9% increase in sales to its retailing partners plus a 28% surge in its food service division.

Those improvements reflected both higher volumes and higher prices. "We were pleased to report record fourth quarter sales," CEO David Ciesiniski said.

Lancaster Colony wasn't able to pass along all of its rising expenses to customers, though. Its gross profit margin declined, and net income fell to $29 million from $32 million in the year-ago period. Management described the selling environment as "difficult" as consumers adjusted to rising prices at supermarkets and restaurants.

Now what

Investors were still pleased to see that Lancaster Colony's sales volumes rebounded sharply in the foodservice division while holding up well in the retail segment. That solid demand should help the company as it gradually raises prices over the next several quarters. Earnings might also see a boost from moderating inflation, if that trend continues.

Management warned that the start of its fiscal 2023 will be impacted by high expenses, as well as by advance orders that occurred this quarter in anticipation of higher prices to come. But its operating trends will likely look stronger as the fiscal year progresses.

Given that bright outlook, it's no surprise that Lancaster County's stock bounced higher on Thursday. For its stock rally to accelerate, though, the food company will need to show steadily rising sales volumes soon.