Domino's Pizza, Inc.
(DPZ - Free Report
) is proving that not all is doom and gloom with the consumer. This Zacks Rank #1 (Strong Buy) is crushing the competition as pizza and the ease of its app for ordering remain popular.
Domino's Pizza is one of the world's largest pizza restaurant chains with 13,200 stores in over 80 markets. Independent franchise owners accounted for over 97% of Domino's stores.
By the end of 2015, its digital sales reached $4.7 billion annually thanks to its clever apps and ordering through text messaging using a pizza emoji.
In late 2015, it also launched its first digital customer loyalty program called Piece of the Pie Rewards.
Domino's Crushed it in the Third Quarter
On Oct 18, Domino's reported its third quarter earnings and easily beat the Zacks Consensus Estimate by $0.06.
Earnings were $0.96 versus the consensus of $0.90.
But even more amazing was the continued growth of its comparable store sales. Domestic same-store-sales rose 13%, the 22nd straight quarter of growth, while international same-store-sales grew 6.6%.
It is one of the few restaurant chains that is growing US sales in the double digits right now.
How's it doing it?
Its mobile app is driving sales, along with its new loyalty program. The pizza industry is very diluted. No one chain has ever dominated the market because there are so many mom-and-pop restaurants. That gives Domino's an opportunity to continue to grow by taking sales away from the mom-and-pops and even bake-at-home or frozen pizza.
Internationally, Domino's is often the only game in town and in some areas it's a well known, trusted brand. If you're vacationing in Cancun and get the pizza urge, who are you going to order from? And the app is right there on your phone.
Domino's opened up 316 new stores in the third quarter as growth is still out there. It recently opened its 1,000th store in India, which is its largest international market. But it also opened its first store in the epicenter of Pizza: in Italy.
Nothing is off limits.
Analysts Love What They See
The story is still really bullish for Domino's. 8 estimates were raised for 2016 after the earnings report which has pushed the 2016 Zacks Consensus up to $4.24 from $4.13 just 30 days ago.
That is earnings growth of 23%.
2017 is looking equally hot. 6 estimates have been revised higher in the last 30 days pushing the Zacks Consensus higher to $5.11 from $4.93. That's another 21% earnings growth.
Shares Hit New Highs
Domino's shares have been on a hot streak the last 5 years as the growth story has improved.
But you're not going to get it cheap. Shares now trade with a forward P/E of 40.
It has been rewarding shareholders with a dividend, currently yielding 0.9%. It also has a share repurchase program. Domino's purchased $59.7 million in the third quarter and has $165.5 million left under its current authorization.
There's no doubt that Domino's is one of the top restaurant chains in the United States right now, but how long can it stay on top?
For investors looking to get into the restaurant industry, Domino's should definitely be on your short list.
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