Domino's delivers -- for shareholders

Will the company's shares remain as tasty as its pizza?

By Jonathan Berr Feb 28, 2012 12:06PM

Image Source/PhotolibraryShares of Domino's Pizza (DPZ) skyrocketed more than 11% in early trading Tuesday after the pizza delivery chain posted better-than-expected fourth quarter earnings.

Net income at the Ann Arbor, Mich. company rose 27.9% to $30.9 million, or 52 cents a share, versus $24.2 million, or 40 cents a share, in the year earlier period. Revenue rose 4.5% to $501.7 million. Wall Street analysts expected earnings of 49 cents on sales of $514.1 million.

The results were impressive across the board. U.S. same-store sales grew 6.8% during the fourth quarter, while sales at international stores opened at least a year rose 4.7%. This comparable sales growth indicates that Domino's efforts to improve the quality of its food have paid off, and it came at the expense of rival Papa John's International (PZZA), which gave a disappointing 2012 earnings outlook late last year.

Shares of Domino's have nearly doubled over the past year as the chain successfully navigated an uncertain economy and the highest cheese prices in 25 years. Papa John's shares rose about 26% during the same time. Both companies will benefit from an expected decline in the price of milk and from rising consumer confidence.

Giving its long range outlook, Domino's now expects international same-store sales to rise 3% to 6%, ahead of a previous forecast of a 3%-5% increase. Sales at U.S. stores opened at least a year are projected to rise 1% to 3%, unchanged from an earlier estimate. The good news, though, is largely factored into the stocks of Domino's and Papa John's.

The average one-year price target on Domino's is $35.10, below the $37.31 where it recently traded. Papa John's stock is expected to gain about 6% during the next 52 weeks, rising to $39.23. Domino's shares are pricey, though, trading at a trailing multiple of 21.22, near their five-year high. Papa John's multiple is 16.62.

Fans of both companies may experience financial indigestion if they try to gobble up their shares.

Freelance writer Jonathan Berr prefers the taste of Papa John's pizza. Sorry Domino's. He doesn't own either stock.

Tags: DPZPZZA
0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

105
105 rated 1
271
271 rated 2
420
420 rated 3
633
633 rated 4
492
492 rated 5
532
532 rated 6
725
725 rated 7
515
515 rated 8
343
343 rated 9
140
140 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
EOGEOG RESOURCES Inc10
SWNSOUTHWESTERN ENERGY COMPANY10
TAT&T Inc9
COPCONOCOPHILLIPS9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.