Analyst Note| Sean Dunlop |
Domino's Pizza reported strong second-quarter results, with $1 billion in revenue and $3.06 in EPS exceeding our estimates of $970 million and $2.81, respectively. Despite lapping robust comps, the firm was able to generate impressive 3.5% comparable-store sales growth in the U.S. and 13.9% in international markets, pushing system sales 17.1% higher than a year ago. Sustained strength abroad led us to revisit our international unit growth assumptions, pushing us to the low end of management's 6%-8% guidance over the next few years (6.4%) and raising our fair value estimate to $410 per share from $386. However, we view the market's reaction as overblown, with the shares trading up 14.5% at the time of writing against our 6.2% fair value estimate lift. The shares currently trade about 30% ahead of our fair value estimate.