Domino’s Pizza (DPZ), formerly a member of IBD’s Long-Term Leaders portfolio, soared Thursday after reporting strong earnings and announcing a $1 billion share buyback. DPZ stock cleared a 447.60 buy point on June 8 and soared past the 500 level Thursday. But is Domino’s stock a buy now?
Domino’s reported Q2 profit of $3.12 a share, up 4% from the year-ago quarter. The company also reported its fifth straight quarter of double-digit revenue growth, with revenue up 12% to $1.03 billion. In the U.S. same-store sales increased 3.4%, a strong number due to a tough comparison to the year-ago quarter when pizza demand was booming during the pandemic.
Outside of the U.S., same-stores jumped 13.9%.
Just ahead of earnings, Domino’s declared a quarterly dividend 94 cents, payable on September 30 to shareholders of record September 15.
Domino’s Relative Strength Rating of 72 ranks it No. 30 in IBD’s restaurant group, according to Stock Checkup. But a Composite Rating of 79 ranks it No. 11, and an Accumulation/Distribution Rating of C+ ranks it No. 24. Above-average volume price gains help the Acc/Dis rating, while above-average volume declines hurt the rating.
To stay competitive with food delivery services like UberEats, Postmates and DoorDash (DASH), Domino’s has been trying to speed up delivery time by opening up more stores.
Wall Street has expressed concern, though, about the company’s “fortressing” strategy, an aggressive expansion strategy where new restaurants are opened near existing ones to improve customer delivery times.
But Q2 revenue increased 13%, with Q3 and Q4 revenue up 18%, so the strategy appears to be working.
To say that Domino’s has embraced technology in recent years would be an understatement. Autonomous driving and artificial intelligence are just two areas the company is targeting to improve efficiency.
The company is currently testing an autonomous vehicle delivery system in Houston in a partnership with robotics firm Nuro.
Full-year profit is expected to rise 9% this year and accelerate in 2022, up 15%. Estimates have been heading higher.
Domino’s Stock: Impressive Q1 Results
DPZ stock reversed impressively higher on April 29 after the company reported its fourth straight quarter of double-digit revenue growth. Big buyers were in Domino’s stock that day after the stock pared a 3% intraday loss to a gain of 3%.
Adjusted Q1 profit dropped 2% year-over-year, but revenue increased 13% to $983.7 million. In an interview with CNBC’s Jim Cramer, CEO Ritch Allison said 75% of orders now come from digital channels.
U.S. same-store sales rose an impressive 13.4%, with international same-stores sales up 11.8%.
India, China, and Japan led in terms of net unit growth. Sales were strong in other markets like China, Japan, Turkey, Colombia, Germany, and France.
IBD’s restaurant group shows strong technicals overall. The group is at highs and has been trending above its 50-day moving average after a breakout to new highs soon after the Nasdaq composite’s follow-through day, which confirmed a new uptrend in early November.
Domino’s Stock: Is It A Buy Now?
The technical picture for DPZ stock has improved dramatically, but the stock is too far extended to consider buying now.
But if Domino’s can hold gains after Thursday’s bullish move and start trading sideways, a new entry could be seen. A series of tight weekly closes could result in a three-weeks-tight pattern. Sideways movement could also result in a flat base.
Please follow Ken Shreve on Twitter at @IBD_KShreve for more on stock market analysis and insight.
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