On Friday, BMO (TSX:BMO) Capital Markets adjusted its price target on shares of Domino's Pizza (NYSE:DPZ) to $525, down from the previous target of $575, while maintaining an Outperform rating on the stock. The revision follows the company's second-quarter earnings report, which showcased a mix of strengths and challenges.
Domino's Pizza reported earnings per share (EPS) of $4.03 for the second quarter of 2024, surpassing the consensus estimate of $3.68. This beat was attributed to a combination of investment gains, lower tax rates, and stronger international comparable store sales, which helped offset weaker U.S. comparable store sales and declining margins.
Despite the adjustment in the price target, BMO Capital's outlook remains positive. The firm has taken into account the company's reiteration of its system sales and operating profit growth guidance, even as it has scaled back its expectations for international unit growth. BMO Capital has moderated its margin estimates while keeping sales projections largely unchanged, resulting in the lowered price target.
The firm also applies a slightly reduced multiple to arrive at the new $525 price target. However, BMO Capital perceives the recent pullback in Domino's shares as an opportunity, citing the company's ongoing business momentum and favorable position for sustained multi-year growth.
Domino's Pizza's latest financial results and the revised price target from BMO Capital highlight the company's resilience and potential for growth amidst a challenging business environment. Investors and market watchers will continue to monitor the performance of the pizza chain as it navigates the balance between domestic and international operations.
In other recent news, Domino's Pizza has seen adjustments in its stock price targets by several analyst firms following its second-quarter earnings report. TD (TSX:TD) Cowen cut its price target to $520 from $610, Loop Capital to $419 from $507, Stephens to $430 from $493, JPMorgan (NYSE:JPM) to $450 from $470, and Evercore ISI to $500 from $560. Despite these reductions, Baird upgraded the shares from Neutral to Outperform, raising its price target to $580.
All these adjustments came in the wake of Domino's exceeding profit expectations with earnings per share of $4.03, surpassing the anticipated $3.68. However, the company's second-quarter sales growth of 4.8% was slightly below the projected 4.91%. The company's overall revenue met the target, reporting $1.10 billion for the quarter.
Domino's Pizza Enterprises announced plans to close several underperforming stores in Japan and France due to flat growth forecasts. This move is expected to impact earnings projections in the near term, leading Morgan Stanley (NYSE:MS) and Macquarie to adjust their earnings estimates downwards.
These are recent developments in the company's performance and market positioning, reflecting the analysis of various firms. The adjustments reflect the analysts' confidence in Domino's business strategies and its potential to navigate future challenges.
InvestingPro Insights
Following BMO Capital Markets' updated outlook on Domino's Pizza, real-time data and insights from InvestingPro further enrich the analysis for investors considering DPZ stock. With a current market capitalization of $14.25 billion and a P/E ratio of 26.38, Domino's stands out in the restaurant industry. The company's revenue for the last twelve months as of Q1 2024 was reported at $4.54 billion, with a slight revenue growth of 5.88% for the quarter, indicating steady financial performance.
Among the notable InvestingPro Tips for Domino's Pizza, the company has demonstrated a commitment to shareholder returns, having raised its dividend for 10 consecutive years and maintained dividend payments for 13 consecutive years.
Moreover, 10 analysts have revised their earnings upwards for the upcoming period, reflecting a positive outlook on the company's earning potential. For investors seeking further insights, there are additional InvestingPro Tips available for Domino's Pizza, which can be accessed with the use of coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
The recent pullback in Domino's shares, with a 1-week price total return of -16.77%, may be seen as a buying opportunity for long-term investors, especially considering the company's high return on assets of 31.9% over the last twelve months. This financial metric showcases Domino's efficient use of its assets to generate profits. The firm's ability to navigate market fluctuations while maintaining financial stability is crucial for sustained growth, aligning with BMO Capital's optimistic stance on the pizza chain's future prospects.
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