Domino's Pizza DPZ has been one of the standout restaurant stocks over the last five years, and its business is tailor-made to thrive during the coronavirus. DPZ shares hit brand new highs of over $430 on Thursday, just one week away from the release of its Q3 FY20 financial results on October 8.
Built for Social Distancing…
Domino's is the world’s largest pizza company by sales and boasts over 17,100 stores in more than 90 markets. The pizza chain had been bolstering its digital ordering offerings for years, as part of a broader industry trend that includes everyone from Starbucks SBUX to Chipotle CMG.
On top of that, DPZ is built largely on a delivery and carry-out model, which is perfect for the coronavirus economy. Pizza is also a food that translates well to delivery as a whole, and Domino’s lower-priced offerings are likely more attractive than ever. And DPZ is always rolling out new pizzas and other foods.
Domino's topped our Q2 FY20 estimates in mid-July, with total revenue up 13.4% and U.S. comps up 16.1%. Looking ahead, our Zacks estimates call for DPZ’s adjusted Q3 earnings to surge 13% to $2.31 per share, on 15% higher revenue.
Domino's fourth quarter sales are then projected to climb 16.4% and its earnings revisions have trended higher since its last report. This EPS positivity helps DPZ earn a Zacks Rank #2 (Buy) right now.
Domino's also holds an “A” grade for Growth in our Style Scores system and it is part of an industry that rests in the top 25% of our more than 250 Zacks industries.
DPZ shares have now soared 300% over the last five years and its 0.73% dividend yield tops the 10-year U.S. Treasury. More recently, Domino’s has climbed 45% in 2020 to outpace the Restaurant Market’s 5% and Papa John's PZZA 32%.
Therefore, investors might want to consider DPZ as a longer-term play for the social distancing world and beyond because pizza is hardly going to out of style.
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