Yesterday, I wrote about the plethora of good news Papa John's
Domino's reported its second-quarter profit rose 47% as it generated net income of $23.4 million, or $0.35 per diluted share, compared with $15.9 million, or $0.18 per share, a year ago. Those results easily topped the high expectations of analysts, who were looking for earnings of $0.32.
Revenues were up 7% thanks to continued global strength at locations that have been open at least a year. Domestically, same-store sales (company-owned and franchise) grew 6.9%; this is on top of the 2.1% growth for the same quarter last year. The international market proved to be just as strong, as comp sales jumped 7.8% after gaining 5% last year -- which, by the way, marks 46 consecutive quarters of international same-store sales growth.
Despite the superior growth across the board, Domino's just maintained its outlook for the year rather than raising its guidance. It's being cautious because it feels that the strong sales from 2004 might be difficult to match. That was enough for some investors who chose to take their money and run, pushing the stock 2.5% lower on the news. You can't really blame them for thinking that perhaps the run is over after being rewarded with gains of nearly 80% in just one year.
Domino's reiterated its outlook for earnings growth of 11% to 13% with earnings per share of $1.24 to $1.27. Decent growth, right? Well, that's not enough for analysts who are expecting much higher earnings of $1.35 per share. Anything less would likely cause the stock to suffer, further validating those investors who decided to jump ship.
I can't say whether or not those investors who sold off made the right decision, and we probably won't know for sure until the end of the year, but it's difficult to justify walking away from such an appetizing company. However, given Domino's tremendous run over the past year, its somewhat cautious outlook for the second half, and the fact that its annual guidance is significantly lower than what analysts are expecting, it might be wise for investors to get their slice to go.
I would, however, keep a close eye on Domino's. I think any decrease in price would likely be short-term, and in the long run it should continue to offer decent growth, although I do think this is the last of its 80% annual gains.
For another bite, see:
Fool contributor Mike Cianciolo doesn't own shares of any company in this article.