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Why Domino's Pizza Stock Jumped 20% in February

By John Ballard - Mar 4, 2020 at 4:05PM

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Customers are flocking to the chain for its speed and digital savviness, as the latest earnings results reveal.

What happened

Shares of Domino's Pizza (DPZ 0.17%) gained 20.5% last month, according to data provided by S&P Global Market Intelligence. The stock has delivered huge gains for investors in recent years, and the latest earnings results fueled that momentum. 

Domino's beat the consensus analyst estimates for sales and earnings when it reported fourth-quarter results on Feb. 20. Adjusted earnings of $3.13 beat the Street's estimate of $2.98, while revenue came in slightly above expectations at $1.15 billion. 

Higher profits led Domino's to raise its dividend by 20% to sweeten the pot for shareholders.

Pizzas and utensils spread out on a table.

Image source: Domino's Pizza.

So what

The leading pizza chain continued to take market share in the industry and delivered its 10th consecutive year of positive same-store sales growth domestically. 

Here are the highlights of the quarter: 

  • Global retail sales growth was 7.6% year over year and 8% for fiscal 2019. Growth was driven by U.S. comps growth of 3.4%, and international comps growth of 1.7%.
  • Adjusted earnings per share jumped 19.5% year over year, with full-year adjusted earnings up 13.7%. Earnings benefited from lower costs, higher royalty revenue from franchised stores, and higher supply chain volumes. 

During the call, CFO Jeffrey Lawrence said, "Our continued sales growth and improved discipline around our general and administrative investments led to a healthy growth in our diluted EPS year over year and strong and consistent free cash flow generation."  

Now what

Domino's reaffirmed its two- to three-year outlook in January, which calls for global retail sales growth of 7% to 10%, while maintaining positive comps in the U.S. and internationally. 

Management plans to continue to "fortress" its markets. This involves opening stores in clusters to get closer to the customer. The name of the game in the restaurant industry is speed, and Domino's has had a lot of success with its investments in technology. It recently rolled out its GPS technology, and Pie Pass technology for in-store pickup, and is making progress in autonomous delivery. 

Domino's Pizza has been a terrific growth stock, and with management's focus on investing in technological innovation, it looks like a restaurant stock that can continue to deliver satisfactory returns.

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