Restaurants

Domino's Pizza shares drop because traders were expecting an even bigger earnings beat

Key Points
  • Even though the company reported 8.4 percent domestic same-store sales growth, investors may have been disappointed.
  • Dominos shares fell 4 percent Thursday.
  • Shares had rallied more than 17 percent since the end of August through Wednesday's close.
An employee removes a pizza from the oven at a Domino's Pizza restaurant in Rantoul, Illinois.
Daniel Acker | Bloomberg | Getty Images

Shares of Dominos fell 4 percent Thursday after the company beat earnings but disappointed some optimistic investors who were hoping for even better growth.

Even though the company reported 8.4 percent domestic same-store sales growth, investors may have been disappointed.

"While this easily topped our +5.5% estimate and sell-side consensus of +6.5%, buy-side expectations had increased meaningfully in recent weeks to above sell-side consensus, a key reason Dominos shares moved up 17 percent," wrote Nomura analyst Mark Kalinowski on Thursday.

"We think the shares may come under pressure today due to this dynamic, as well some investors simply taking a 'sell on good news' approach."

Shares had rallied more than 17 percent since the end of August through Wednesday's close. The company posted a better-than-expected profit on Thursday on higher demand in the United States. Net income rose to $56.4 million, or $1.18 per share, from $47.2 million, or 96 cents per share, a year earlier.

Earnings also beat expectations: Excluding items, the company earned a profit of $1.27 per share, beating analysts' average estimate of $1.22. Dominos credited new accounting techniques and excess tax benefits on equity for driving diluted EPS seven cents higher.

Programming Note: For more on Domino's, watch CEO Patrick Doyle's interview on "Mad Money" tonight at 6 p.m. ET.