Bank Of America Incrementally Bullish On Domino's Pizza After Q4 Print

Domino's Pizza, Inc. DPZ's mixed fourth-quarter earnings report Tuesday initially sent shares of the pizza chain lower, but turned one Wall Street analyst incrementally bullish.

The Analyst

Bank of America Merrill Lynch's Gregory Francfort maintains a Buy rating on Domino's Pizza's stock with a price target boosted from $225 to $245.

The Thesis

Domino's said in its earnings report that same-store sales at company-owned stores in the U.S. rose 3.8 percent — and 4.2 percent at franchised stores — which fell short of the 5.39 percent the Street sought. The miss was "modestly disappointing," as investors were "already bracing" for it, Francfort said in a Tuesday note.

The shortfall is attributed to the New Year's shift, which will flip to a tailwind in the first quarter, the analyst said. Poor weather negatively impacted sales in Q4, but weather switched to a tailwind in Q1, he said. 

The international segment realized 26-percent growth in franchise revenue and is being supported by the fees linked with the expansion of online ordering and POS capabilities to new markets, Francfort said. 

A bullish stance on the restaurant chain is based on expectations for EPS beats ahead coupled with accelerating unit growth in the U.S., the analyst said. The revised price target higher is due to BofA's belief that strong earnings flow-through and accelerated unit growth warrants a premium valuation compared to the restaurant group as a whole, Francfort said. 

Price Action

Shares of Domino's Pizza hit a new all-time high of $228.59 Wednesday morning and were higher by 1.54 percent at the time of publication. 

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Photo courtesy of Domino's.