Warren Buffett added Domino’s Pizza (NYSE:) to his Berkshire Hathaway (NYSE:) portfolio last year.
Domino’s stock rose more than 1% on Monday, thanks to a late day surge that brought it into the green.
The stock had recovered from a nearly 4% fall in the morning session, as investors reacted to a revenue miss in the first quarter by the pizza maker.
But after they had a chance to digest the quarterly earnings, investors found that it was more satisfying than initially thought.
The world’s largest pizza chain generated revenue of $1.11 billion in the quarter, which was up 2.5% year over year. However, it fell a tad short of estimates of $1.3 billion.
Net income climbed 18.9% in the quarter to $150 million, while earnings rose 20% to $4.33 per share. That easily bested estimates of $4.12 per share.
Hungry for MORE
So, while revenue fell short of estimates, it was not by much, considering the difficult economic environment.
CEO Russell Weiner attributed the solid performance to its execution on the Hungry for MORE strategy. The five-year campaign that runs through 2028 focuses on four pillars — Most Delicious Food, Operational Excellence, Renowned Value, and Enhanced by Best-in-Class Franchisees and Team Members.
“In the face of a challenging global macroeconomic environment, our Hungry for MORE strategic pillars are working together to drive MORE sales, MORE stores and MORE profits, annually. This is how we will deliver long term value for our franchisees and shareholders,” Weiner said.
While U.S. stores lagged, Domino’s got a boost from international markets. Overall retail sales by company-run and franchisee stores hit $4.46 billion, up 4.7%. International sales jumped 8.23% compared to 1.3% in the U.S. Also, international saw a 3.7% increase in same store sales, compared to a 0.5% decline in the U.S.
Revenue was up primarily due to higher U.S. franchise advertising revenues, higher supply chain revenues and higher international franchise royalties and fees.
Net income was boosted by a favorable change of $42.7 million in the pre-tax unrealized gains and losses associated with the remeasurement of the company’s investment in DPC.
Buffett’s Favorite Pizza Shop
Berkshire Hathaway CEO Warren Buffett added Domino’s Pizza stock to his portfolio just last year.
While Buffett rarely talks about why he buys or sells a particular stock, one thing we know is he likes good values.
Buffett appeared to be preparing his portfolio for a downturn, as he shed some overpriced shares in companies like Apple (NASDAQ:). Buffett’s Domino’s stock buy may be related to its decent relative valuation at the time and its incredibly consistent performance over the years.
Domino’s stock has posted an average annualized return of 16% over the past 10 years, with the only down year being the 2022 bear market.
This year, the stock price is up 17%, far outpacing the market. Domino’s stock has proven to be resilient, particularly during economic downturns, as consumers tend to favor more affordable takeout options in challenging environments.
Domino’s also declared a dividend of $1.74 per share in the quarter, marking the 11th consecutive year of dividend increases. The dividend comes at a yield of 1.43%.
Domino’s valuation has increased a bit this year, trading at 29 times earnings. Investors may want to monitor that and look for a dip, especially after today’s jump. But overall, Domino’s looks like a good option, particularly in this type of environment.