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Domino’s Jumps As Surprise U.S. Comp Sales Gain Lifts Earnings; Buyback OK’d

Domino’s Pizza (DPZ) on Thursday reported strong second-quarter earnings as U.S. same-store sales unexpectedly rose. DPZ stock surged.




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Domino’s reports after the coronavirus pandemic last year limited restaurant service across the U.S. and steered more business to the pizza chain. But the company has faced questions about whether it can hold onto that business, amid a reopening economy and tough comparisons.

Domino’s Pizza Earnings

Estimates: Wall Street expected Domino’s Pizza to earn $2.87 per share, down 4% from a year ago. Revenue was expected to increase 6% to $974 million.

Consensus Metrix forecast domestic system-wide same-store sales to fall 0.9%. Same-store sales for the chain’s international franchise segment were seen rising 9.5%.

Results: EPS of $3.12 on revenue of $1.03 billion. Same-store sales rose 3.5% in the U.S. and 13.9% internationally.

In Q2, cumulative two-year same stores sales were up 19.6% domestically and 15.2% internationally.

Domino’s also approved a $1 billion repurchase program.

DPZ Stock

Shares leapt 10% to a new high of 517.44 on the stock market today. DPZ stock touched an earlier record high last week, raising concerns about its valuation. But prior to the company’s earnings, some analysts in recent days nonetheless expressed more optimism about the company overall.

“It just doesn’t seem that the U.S. reopening has caused any noticeable step-down in sales levels for the pizza category,” Stephens analyst James Rutherford said in a research note on Monday. “Now that the stock is up 20% since early May, we do feel that this more optimistic view on U.S. comps is reflected in the share price.”

RBC analyst Christopher Carril, in a research note last week, said that tough year-over-year comparisons in the second quarter and third quarter “previously drove the bear thesis” for Domino’s. But he said the move higher for DPZ stock “suggests the market has largely moved past these concerns.”

“And while valuation is currently demanding,” he said, “we continue to view DPZ as well-positioned to capitalize on long-term off-premise demand growth, while gaining share within the large, fragmented pizza category.”

Carril said Domino’s carryout business, which made up 43% of its U.S. transactions last year and a third of its U.S. sales, represented an opportunity to grow margins and compete against third-party delivery apps.

Meanwhile, Domino’s has continued to invest in its digital ordering and delivery network. The company in April said it and Nuro, an autonomous delivery vehicle startup, had launched limited delivery service in Houston that uses Nuro’s self-driving cars.

DPZ stock has an 83 Composite Rating. Its EPS Rating is 81.

Other Restaurant Stocks

Chipotle Mexican Grill (CMG) rose 1% to Thursday after jumping 11.5% Wednesday.

Chipotle on Tuesday reported second-quarter earnings that beat expectations. Management forecast third-quarter same-store sales to be in the “low to mid double-digits range,” provided current trends continued. That outlook was above Wall Street’s expectations.

McDonald’s (MCD), which reports second-quarter earnings next week, rose 0.3% to 236.65. Shares were in a flat base with a 238.28 buy point.

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