On Friday, BMO Capital adjusted its stock price target for Domino's Pizza (NYSE:DPZ), decreasing it to $500 from the previous $510, while keeping an Outperform rating on the stock. The revision follows the company's third-quarter earnings release, where Domino's reported earnings per share (EPS) of $4.19, surpassing the consensus estimate of $3.65.
This beat was attributed to a roughly $0.60 investment gain from Domino's Pizza China (DPC). However, excluding this gain, the earnings slightly missed expectations due to weaker comparable store sales that overshadowed the benefits from improved profit margins.
Domino's has revised its guidance for 2024 downward and offered a less optimistic outlook for 2025, which currently does not factor in any potential collaboration with DoorDash (NASDAQ:DASH). The tempered expectations come amidst a challenging business environment that has led to a softer second half of the year than initially anticipated.
Despite the reduced guidance, BMO Capital remains positive on Domino's prospects. The firm believes the current market sentiment towards the company is overly negative. They argue that there is an asymmetric risk/reward situation, suggesting that the potential upsides outweigh the downsides. BMO Capital cites Domino's successful strategy and the possibility of new sales drivers appearing in the near future as reasons for their constructive outlook on the company's shares.
The analyst from BMO Capital highlighted that while the current environment has posed challenges for Domino's, the company's strategy has continued to show signs of success. The analyst also hinted at the potential for additional sales drivers that could emerge, which may not be currently reflected in the stock's valuation.
In other recent news, Domino's Pizza reported third-quarter earnings per share of $4.19, surpassing the estimated $3.65. However, the company experienced a 3% increase in U.S. same-store sales, falling short of the projected 3.6% increase, and a 0.8% increase in international sales, missing the anticipated 2.9% growth.
Domino's has forecasted a global retail sales growth of 6% for the fiscal year 2025, which is below the long-term projections. Despite this, Domino's has maintained its forecast for adjusted operating income growth, anticipating an approximate 8% increase.
Several analyst firms have adjusted their price targets for Domino's shares. Piper Sandler raised the price target to $422, maintaining a Neutral rating, while Stephens cut the target to $420 due to the company's cautious outlook for 2025. Baird maintained an Outperform rating with a steady price target of $535, expressing confidence in the company's profit outlook for 2024-2025.
RBC Capital lowered the target to $490, citing revised estimates after revenues missed expectations by 1.6%. Jefferies trimmed the price target for Domino's to $450 while keeping a Hold rating. These are the recent developments in the company's performance.
InvestingPro Insights
Despite the recent price target adjustment by BMO Capital, Domino's Pizza (NYSE:DPZ) continues to demonstrate financial resilience. According to InvestingPro data, the company boasts a market capitalization of $14.3 billion and a P/E ratio of 25.4, indicating investor confidence in its earnings potential.
InvestingPro Tips highlight Domino's strong dividend history, having raised its dividend for 11 consecutive years and maintained payments for 13 years. This commitment to shareholder returns aligns with the company's robust financial position, as liquid assets exceed short-term obligations.
While BMO Capital remains optimistic about Domino's future, it's worth noting that 13 analysts have revised their earnings downwards for the upcoming period, suggesting some caution in the near term. However, the company's profitability over the last twelve months and analysts' predictions of continued profitability this year support BMO's positive long-term outlook.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights that could provide valuable context to Domino's current market position and future prospects.
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