Shareholders of Domino's Pizza (NASDAQ: DPZ) have some extra cash to order a loaded extra-large pie tonight. The stock spiked more than 10% higher Thursday morning. At 12:10 p.m. ET today, it was still up by 6.4%.
The move likely came thanks to an earnings report. But it wasn't the one from Domino's itself. The pizza chain will report its fourth-quarter earnings on Monday, Feb. 24. But a peer, casual dining company Brinker International -- owner of Chili's and Maggiano's Little Italy -- boosted the optimism of Domino's watchers after its quarterly report yesterday.
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And investors have been looking for a reason to be more optimistic on Domino's ever since it provided a disappointing outlook last July, sending shares tanking.
A Warren Buffett name
The pizza chain's shares dropped about 18% in a week last July when management predicted that growth in comparable store sales (comps) in the U.S. would drop to 3% for the final half of 2024. That was following 4.8% growth in the company's second quarter.
Yesterday's report by Brinker gave investors in that sector reason to think that Domino's could provide better news when it reports earnings in a few weeks.
While the two companies have different business models and areas of focus, there are overlaps in their customer base and within the competitive landscape. Yesterday, Brinker announced a 27.4% increase in comps in its most recent quarterly period, driven by 31% comps growth for Chili's.
Domino's also targets people looking for convenient dining options, and investors think a rebound in its comps might now be a catalyst for the stock to rebound. Shares have yet to recover to the level seen prior to last July's drop.
One highly respected investor decided to jump in during that period, too. Warren Buffett's Berkshire Hathaway announced last November that it had acquired about 1.3 million shares of Domino's stock. That's good company, and with a potential upside surprise in comps coming, buyers are pouring in today.
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Howard Smith has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway and Domino's Pizza. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
