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Domino's Pizza Inc DPZ

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Morningstar’s Analysis

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Domino's Delivers Great Q2 Results, but Shares No Bargain

Sean Dunlop Equity Analyst

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.

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Company Profile

Business Description

Domino’s Pizza is a restaurant operator and franchiser with more than 17,800 stores across 90 countries. The firm generates revenue through the sales of pizza, wings, salads, and sandwiches at company-owned stores, royalty and marketing contributions from franchise-operated stores, and its network of 26 dough manufacturing and supply chain facilities, which centralize purchasing, preparation, and last-mile delivery for more than 6,800 units in the U.S. and Canada. With roughly $16 billion in 2020 system sales, Domino’s is the largest player in the global pizza market, ahead of Pizza Hut, Papa John’s, and Little Caesars.

Contact
30 Frank Lloyd Wright Drive
Ann Arbor, MI, 48105
T +1 734 930-3030
Sector Consumer Cyclical
Industry Restaurants
Most Recent Earnings Jun 30, 2021
Fiscal Year End Jan 2, 2022
Stock Type Cyclical
Employees 14,400

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