Will earnings feed Domino’s share price?

Despite a slow start in January and February, Domino’s Pizza’s [DPZ] share price has gone from strength to strength this year following its end of year results for fiscal year 2019.

Although Domino’s share price tumbled as the coronavirus pandemic took a hold of the markets, closing at $286.32 on 16 March (down 2.54% year to date), the stock was quick to recover and has since soared to new heights.

In fact, Domino’s share price has been regularly topping its record high since 22 April.

On 2 October, Domino’s share price reached an intraday high of $435.14 before closing at a new all-time high of $433.78 — up 48.6% for the year to date. The stock dipped slightly during the following trading session (5 October) to close at $424.94.

What will happen to Domino’s share price when it delivers its Q3 earnings report on 8 October?

How has Domino’s been performing?

When Domino’s released its Q2 earnings on 16 July, it reported adjusted earnings of $2.99 per share, beating the Zacks consensus estimate of $2.24 by 33.4%. This also showed growth of 36.5% on a year over year basis. According to Zacks, the bottom line was driven by higher net income.

Domino’s also reported impressive quarterly revenues in the second quarter, which had grown 13.4% year over year to $920m, beating the Zacks consensus of $898.1m by 2.43%.

It’s been an incredible run for Domino’s as the earnings and revenue beats respectively marked the sixth and third consecutive quarters during which the company has beaten analysts’ expectations. Domino’s share price growth reflects this fiscal success.

Zacks reported that Q2 marked the 37th straight quarter of positive US comparable sales and the 106th consecutive quarter of positive international comps.

“Our focus as a global brand and the commitment of our local operators remains steadfast on serving our customers and our communities with a convenient, affordable and safe food and service experience,” said Richard Allison, Domino’s CEO in a statement released alongside the Q2 results.

“I have never been more proud of our system of franchises, operators and corporate team members for their continued passion and innovative spirit, which was evident during the second quarter.”

Looking ahead to the third quarter, the Zacks consensus estimate for earnings stands at $2.73 which, if correct, would be a rise of 33.1% from the same time last year.

As for quarterly revenues, Zacks reports a consensus estimate of $944.5m, which would indicate growth of 15.1% from the prior-year quarter.

“Domino’s Pizza is one of the fortunate companies experiencing increased business due to the coronavirus pandemic. Stay-at-home orders and people's hesitancy to leave their homes have led to an increase in orders for the company,” Parkev Tatevosian wrote in The Motley Fool.

What the analysts think of Domino’s share price

MKM Partners analyst Brett Levy raised the firm's price target on Domino’s share price from $385 to $445, keeping a Neutral rating, reports The Fly. The analyst reportedly cited Domino’s mid-teen same-store-sales trends over the past few months as well as a recent update from its large competitor Papa John's [PZZA] on its comps rising 24%.

Levy added that Domino’s share price has benefitted from a “solid execution and strategic story”, and he expects its management to remain focused on its approach to drive business.

Among 28 analysts polled by CNN Money, the consensus is to buy the stock. This rating is held by a majority of 16 analysts, with 10 suggesting to hold the stock, one giving it an Outperform rating and another giving it an Underperform.

The median 12-month price target among 25 analysts polled by CNN Money is $444, with a high estimate of $512 and a low of $350. The median price represents a 4.5% increase from Domino’s share price as of 2 October’s close.

“If the company beats those estimates, look for the stock to rally,” Tatevosian concluded.