Domino’s Pizza Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Domino’s Pizza (NYSE: DPZ  ) rallied more than 10% after announcing strong second-quarter results and a plan to refinance $1.45 billion in debt.

So what: Revenue rose 6% to $384.9 million while profit rose 8% to $0.40 a share. Same-store sales increased 4.8% in the U.S. and 7.4% in other parts of the world. Analysts had been calling for $376.8 million and $0.36 a share, respectively.

Now what:  Domino's made plenty of dough, taking in $789 million in cash from operations through the first six months of the year. Even so, CEO Patrick Doyle is tapping the capital markets to refinance securitized debt owed by Domino's subsidiaries. The offering is expected to close during Q3. Rates weren't disclosed, but with the Fed in inflation-fighting mode it's a good bet that Domino's is paying far less than the 50%-plus it tends to earn on its invested capital. Do you agree? Disagree? Let us know what you think about Domino’s business using the comments box below.

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Fool contributorTim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn’t own shares in any of the companies mentioned in this article at the time of publication. Check out Tim'sportfolio holdings andFoolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insightsdelivered directly to your RSS reader.

The Motley Fool owns shares of Domino's Pizza. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policy.


Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 26, 2011, at 7:41 PM, Fyask0 wrote:

    Is the $789 Million in cash from operations accurate?

    I don't think that's correct. I think they took in approximately $78 million in cash from operations in the first 6 months of the year.

    So yes, they should keep this cash and refinance their debt. Especially before inflation hits and interest rates rise.

    I like Domino's CEO. For a pizza company they've embraced technology and this has helped them tremendously. He's now making a smart move to refinance their debt while rates are historically low.

  • Report this Comment On July 26, 2011, at 9:09 PM, TMFMileHigh wrote:

    @Fyask0,

    You're right; I was looking in the wrong spot on the press release. The cash flow statement shows $44.4 million in CFFO over the first six months of the fiscal year.

    Thanks for the correction and Foolish best,

    Tim (TMFMileHigh and @milehighfool on Twitter)

  • Report this Comment On July 27, 2011, at 1:48 AM, Fyask0 wrote:

    Gotcha ... it's still a pretty decent number. However, if I owned shares I'd keep my eye on rising food prices. I don't see how Dominos is going to successfully pass this cost to the customer if the costs get out of hand, so this could hurt CFFO.

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Domino's Pizza CAPS Rating: ***

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