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Bear of the Day: Domino's (DPZ)

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Domino's Pizza (DPZ - Free Report) has fallen to a Zacks Rank #5 (Strong Sell) as one analyst has lowered full year estimates for 2021 and 2022.

But Domino's still has its crown as the "king" of restaurants with stellar same-store-sales growth during the pandemic.

Domino's is the largest pizza company in the world based on retail sales. It has more than 17,800 stores in 9 markets.

Thanks to its great app, half of all global retail sales in 2020 were from digital channels and in the US, it generated more than 70% of sales last year via digital channels.

In addition to delivery and dine-in, the company also launched Carside Delivery and now has a 2-minute delivery guarantee to your car or your next pizza is free.

A Beat in Q1

On Apr 29, Domino's reported its first quarter results and beat the Zacks Consensus by $0.06. Earnings were $3.00 versus the Consensus of $2.94.

Global retail sales were up 16.7%, or 14% excluding foreign currency impact.

The all important same-store-sales looked great with the US up 13.4%, after seeing a 1.6% gain in 2020, and International was up 11.8%, after seeing a 1.5% gain last year.

What will the year-over-year same-store-sales look like for Q2 which was the first big pandemic impacted quarter last year?

Stay tuned.

Domino's reports Q2 earnings on July 22, before the market opens.

Earnings Still Expected to Be Higher in 2021 and 2022

Domino's made $12.01 per share in 2020, the pandemic year.

Analysts still expect earnings to grow in 2021, with the Zacks Consensus at $12.79. However, one analyst has lowered in the last 60 days, which is why the Zacks Rank has fallen to a #5 (Strong Sell).

Yes, it just takes one analyst, sometimes, to cause the Rank to slide.

One estimate was also lowered in the last 2 months for 2022 as well but analysts expect the company to make $14.81, which is another 15.8% growth.

This is not a situation where the estimates are now sinking, year-over-year.

Shares At New All-Time Highs

Domino's has been a hot stock for the last 5 years and is hitting new all-time highs again. It has gained another 23.7% year-to-date.

Zacks Investment ResearchImage Source: Zacks Investment Research

But is it too hot to handle (again)?

Shares now trade with a forward P/E of 37.4 even with the rising earnings estimates. The last few years, it has traded closer to 30x.

It's shareholder friendly and pays a dividend, currently yielding 0.8%.

Even with the economy reopening, pizza likely remained one of the top choices among consumers.

One thing I've learned is to never bet against Domino's and the pizza-eating public. Look for changes in the Zacks Rank after it reports earnings on July 22.

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