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March 1, 2021, 3:40 p.m. EST

Papa John’s, Domino’s look to new non-pizza menu items to fuel growth

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Tonya Garcia

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Domino’s holds up its value pricing as an asset.

“Value is always a key focus for us and that won’t change in 2021,” Chief Executive Allison said on the call. “More than ever, with many Americans out of work in these uncertain economic times, value matters. And we’re committed to maintaining our unquestioned position of value leadership within the QSR [quick-service restaurant] pizza segment.”

Domino’s reported fourth-quarter earnings and revenue that missed expectations.

Papa John’s earnings missed expectations , but the company reported better-than-expected revenue. Special year-end bonuses for workers impacted the earnings result by about 6 cents.

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“We continue to view the long-term dynamics of Domino’s unit growth, sales driving initiatives, technology innovation, and infrastructure as competitively sound, but expect optimism around its topline compares to weigh on its near-term prospects,” wrote MKM Partners in a note.

MKM rates Domino’s Pizza stock neutral with a $380 fair-value estimate, down from $420.

MKM also rates Papa John’s stock neutral with a $102 fair-value estimate.

“Balancing out management’s intermediate-to-long-term enthusiasm, in the face of potentially stifling near-term record compares starting in the spring, creates an atmosphere where investors may be forced to take a more guarded approach to the shares,” MKM analysts said.

Stifel rates Domino’s shares hold with a $390 target price, down from $400.

“While we remain constructive on the company’s long-term fundamentalprospects, we anticipate shares will remain range-bound until investors gain greater comfort the company can retain a significant portion of the sales growth it experienced during the pandemic, ” analysts wrote in a Domino’s note.

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RBC Capital Markets says Domino’s carryout business will be an advantage going forward.

“Prior to last year, carryout represented ~45% of U.S. transactions, and while that declined in 2020 as delivery demand increased, it remains a key focus for Domino’s and an area of improvement for 2021,” analysts wrote.

“And looking beyond leveraging carryout as a way to play defense against growing delivery competition, carryout presents the opportunity to expand margins (vs. lower-margin delivery transactions), which should further support already-strong unit economics and thus further unit development.”

RBC rates Domino’s stock outperform with a $428 price target, down from $449.

Domino’s stock is up 2.1% for the last year.

Papa John’s stock has surged 63.4% over the past year.

The S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.93% is up 32.1% for the past year.

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May 11, 2021 12:12p

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