The Stock of Domino's Leaps Toward a 2-year High After Its Profits Beat Expectations

Domino’s Pizza Inc. experienced a significant surge in its stock value on Monday following a quarterly profit that surpassed expectations, driven by robust performance in both delivery and carryout sales. The company's rewards program played a pivotal role in these positive results, with an increase of 3 million active members, constituting a 10% growth, culminating in 33 million active members by the end of 2023.

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CEO Russell Weiner attributed this growth to the success of their innovative marketing initiative, the "emergency pizza" promotion. This strategy not only increased active members but also contributed to the early success of the Domino’s Rewards program. Weiner shared these insights during the post-earnings call with analysts, emphasizing the effectiveness of their customer acquisition efforts.

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In morning trading, Domino’s stock (DPZ) surged by 5.9%, indicating the potential for its highest close since January 19, 2022. The company reported fiscal fourth-quarter net income of $157.3 million, or $4.48 per share, compared to the year-earlier period's net income of $158.3 million, or $4.43 per share. Although the net income showed a slight decline, the earnings per share (EPS) increased due to a reduction in the number of shares used for calculation, resulting from the company's $269 million share repurchases in 2023.

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While analysts tracked by FactSet had anticipated an EPS of $4.38, Domino’s exceeded expectations by delivering $4.48. However, the revenue for the quarter only saw a modest increase of 0.8%, reaching $1.40 billion, falling slightly short of the analysts' consensus of $1.42 billion.

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Domino’s demonstrated robust performance in the U.S. market, with 2.8% same-store-sales growth in the fourth quarter. Additionally, international same-store-sales growth, excluding currency impacts, showed a marginal increase of 0.1%. The FactSet consensus for U.S. same-store sales had predicted a rise of 2.2%.

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In the fourth quarter, the company witnessed a sequential net growth of 92 franchised U.S. stores, while the international store count increased by a net of 302.

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CEO Weiner highlighted the positive growth in U.S. transactions and same-store sales, emphasizing the strength and momentum in their business. The promotion of their "homemade pan pizza" offering, featured on air for the first time since 2014, played a role in spreading awareness. Weiner expressed the need to change the perception of their Pan Pizza as their "best-kept secret."

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On February 21, Domino’s board of directors approved a 25% increase in its quarterly dividend, now declared at $1.51 per share. Shareholders of record on March 15 will receive the new dividend on March 29. At current prices, the new dividend rate yields 1.32%, slightly lower than the S&P 500 index's implied yield of 1.41%.

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In addition to the dividend increase, Domino’s announced a new $1 billion stock repurchase program, bringing the total authorization for repurchases to $1.14 billion. This represents approximately 7.1% of Domino’s market capitalization, which is around $16.02 billion.

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Over the past three months, Domino’s stock has surged by 24.0%, outperforming the S&P 500's 11.6% gain. The company's proactive measures, including dividend hikes and stock repurchases, reflect confidence in its financial position and strategic direction.

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