We are initiating coverage on
Domino's Pizza Inc.
with a Neutral recommendation. While we prefer the company's
ability to post solid earnings growth in recent times; strong
brand positioning in the U.S. pizza delivery segment, a strong
overseas presence and traction in digital ordering, a sluggish
macro-environment and higher prices for cheese keep us on the
sidelines at the current level.
Why the Neutral Recommendation?
Domino's is the market leader in the pizza delivery segment in
the U.S. and ranks second in the carry-out segment.
Internationally, it is the second largest pizza delivery service
based on the number of units and sales.
It delivered solid results in 2012 and continued its winning
momentum in first-quarter 2013. Both its first-quarter earnings
per share and revenues beat the Zacks Consensus Estimates and
grew year over year, driven by improved volumes, global market
share growth and operating margin expansion.
Domino's offers immense growth potential worldwide. It continues
to post strong same-store sales in the international markets
despite volatile macro-economic conditions in the recent past. It
has registered 77 consecutive quarters of positive same-store
sales in its international business.
Domino's has been concentrating and investing heavily on
technology-driven initiatives like digital ordering to boost its
sales over the last three years. Digital ordering has been
consistently at the rate of about 5% a year. This is also an
important tool to combat the competition from smaller players in
However, despite these encouraging facts, some concerns prevent
us from being too optimistic on the stock. Both a sluggish
macro-environment and higher cheese prices can hamper the winning
momentum of Domino's.
Other Stocks to Consider
Others players in the same industry, which look attractive at
current levels include
The Wendy's Co.
The Cheesecake Factory Inc
Burger King Worldwide Inc.
) all carrying a Zacks Rank #2 (Buy).
BURGER KING WWD (BKW): Free Stock Analysis
CHEESECAKE FACT (CAKE): Free Stock Analysis
DOMINOS PIZZA (DPZ): Free Stock Analysis
WENDYS CO/THE (WEN): Free Stock Analysis
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