Bear of the day: Domino’s (DPZ)
Domino’s Pizza (DPZ) fell to rank 5 of Zacks (strong sell) as an analyst lowered its annual estimates for 2021 and 2022.
But Domino’s still has its crown of “king” of restaurants with stellar same-store sales growth during the pandemic.
Domino’s is the world’s largest retail-based pizza company. 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 over 70% of sales last year through digital channels.
In addition to on-site delivery and dinner, the company has also launched Carside Delivery and now offers a 2-minute delivery guarantee to your car or your next pizza is free.
A beat in the first trimester
On April 29, Domino’s released its first quarter results and beat the Zacks Consensus by $ 0.06. The gains were $ 3.00 versus the consensus of $ 2.94.
Global retail sales increased 16.7%, or 14% excluding currency impact.
Top comparable store sales looked excellent with the United States up 13.4%, after posting a 1.6% gain in 2020, and International was up 11.8%, after recording a gain of 1.5% last year.
What will year-over-year comparable store sales look like for the second quarter, which was the first major quarter hit by the pandemic last year?
Domino’s announces its second quarter results on July 22, before the market opens.
Profits are still expected to be higher in 2021 and 2022
Domino’s earned $ 12.01 per share in 2020, the year of the pandemic.
Analysts still expect earnings growth in 2021, with Zacks’ consensus at $ 12.79. However, one analyst has fallen in the last 60 days, which is why the Zacks rank has fallen to 5 (strong sell).
Yes, sometimes all it takes is one analyst to bring down the rankings.
An estimate has also been lowered in the past 2 months for 2022, but analysts expect the company to earn $ 14.81, which is an additional 15.8% growth.
This is not a situation where estimates are now dropping year over year.
Stocks to new historic highs
Domino’s has been a hot stock for the past 5 years and is once again hitting new all-time highs. It has gained another 23.7% since the start of the year.
Image source: Zacks Investment Research
But is it too hot to handle (again)?
Stocks are now trading with a forward P / E of 37.4, even with earnings estimates rising. Over the past few years it has traded closer to 30x.
It is favorable to shareholders and pays a dividend, currently earning 0.8%.
Even with the economy reopening, pizza has likely remained one of the top choices among consumers.
One thing I learned is never bet against Domino’s and pizza lovers. Look for changes in the Zacks ranking after its earnings release on July 22.
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