Domino's Flops on Sales Miss: Buy or Sell?

On an otherwise up day for the market, shares of Domino’s Pizza Inc. (DPZ) are falling after the pizza delivery giant posted second-quarter results. Is Domino’s running out of steam, or is this an opportunity to buy on the dip? Let’s dig into the details.

In a nutshell, the pullback was a knee-jerk reaction to one line item in an otherwise solid report. Last quarter, Domino’s international sales rose 2.6%, below analysts’ estimates for a 5.1% increase. However, Domino’s U.S. sales jumped 9.5%, well above the consensus estimate for a 7.9% increase.

Overall revenue climbed 15% year-over-year to $628.6 million, above the $613.4 million consensus estimate. Meanwhile, net income came in at $65.7 million, or $1.32 per share. Analysts were expecting $1.22 EPS so Domino’s posted an 8.2% earnings surprise.

Domino’s shares have been on a roll lately, so investors took the international sales miss as an excuse to take profits. However, I’m not worried at all about Domino’s sales or earnings prospects. Looking ahead to the next several quarters, Domino’s is expected to maintain double-digit earnings growth and sales growth around the low teens.

DPZ is also one of a few stocks that receive top marks in both Portfolio Grader and Dividend Grader. It has a sold 1.0% annual dividend yield, and it will likely declare its next quarterly dividend over the next few days. I do expect that DPZ will rebound in the coming days, so I recommend that you buy DPZ on the dip.

Sincerely,

Louis Navellier

Louis Navellier

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