Domino's Pizza's Q3 Demonstrates Consistent Market Share Gains

BTIG’s Peter Saleh maintains his Buy rating and raised the target price on Domino's Pizza, Inc. DPZ shares by $31 to $195 after the company’s digital strategy helped it to gain consistent market share in the third quarter, despite a slowdown in the fast-food sector.

Domino’s reported third-quarter EPS of $0.96, above BTIG’s $0.87 estimate and consensus of $0.90, driven by stronger comps and segment margins which lapped last year’s higher insurance expense.

Meanwhile, domestic system-wide comps increased 13.0 percent, above BITG’s 8.5 percent estimate on the back of “Piece of the Pie” rewards program. International comps grew 6.6 percent versus BTIG’s 6 percent estimate.

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The company’s two-year system comps rose 100 bps to 23.5 percent, “the highest in recent history as the brand’s sales momentum continues.”

“We continue to believe that digital innovation, an enhanced customer experience, and the brand’s ability to leverage the cost of digital across more than 5,200 domestic stores is a competitive advantage not easily replicated by peers,” Saleh wrote in a note.

Saleh also noted that the market is underestimating Domino’s lower ordering costs, which give the large chains a significant advantage.

To reflect strong third-quarter results, the analyst raised his 2016 and 2017 EPS estimates to $4.23 and $5.12 from $4.09 and $4.82, respectively.

At time of writing, shares of Domino’s had risen 2.47 percent on the day to trade at $163.39.

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