It was a positive day on Wall Street, with the Dow Jones Industrial Average (DJINDICES: ^DJI) gaining 100 points and the S&P 500 (SNPINDEX: ^GSPC) setting a record high.
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Today's stock market
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The price of crude oil rose strongly, taking energy stocks with it; the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT: XOP) gained 3.2%. Retail stocks rose today as well, with the SPDR S&P Retail ETF (NYSEMKT: XRT) up 2.6%.
Two global restaurant chains trounced quarterly earnings expectations today and got different reactions from the market. McDonald's Corporation (NYSE: MCD) saw its stock rise on sales gains, and Domino's Pizza (NYSE: DPZ) delivered good numbers that failed to impress investors.
McDonald's serves up juicy results
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Fast-food chain McDonald's reported the latest in a series of quarters that met with investor approval, sending shares up 4.8%. Global comparable sales increased 6.6%, the strongest result in over five years. U.S. comparable sales were up 3.9% and international comparable sales gains increased 6.3%. Revenue decreased 3% to $6.05 billion due to the refranchising of company stores, but that exceeded analyst expectations of $5.96 billion. Earnings per share were up 36% to $1.70 versus an expected $1.62.
"We're building a better McDonald's and more customers are noticing," said CEO Steve Easterbrook in the press release. "Our relentless commitment to running great restaurants and keeping the customer at the center of everything we do is generating broad-based strength and momentum across our entire business."
Facing competition from new chains that offer "premium" burgers, McDonald's recent steps to upgrade its offerings are clearly paying off. All-day breakfast, multiple sizes of Big Macs, and the Signature Crafted premium sandwich are reinvigorating sales. Plans to experiment with mobile ordering, kiosk ordering, and delivery may be lagging leaders like Domino's Pizza, but recent results have McDonald's investors thinking the venerable chain is going in the right direction.
Domino's delivers, but investors wanted something spicier
Domino's Pizza reported a strong increase in sales and profits for the quarter, handily beating analyst expectations for revenue and earnings per share, but same-store sales growth in its international segment fell from the rate a year earlier for the fourth quarter in a row. The stock slumped 10% on the news.
Domestic same-store sales grew 9.5% over the prior year, while international same-store sales grew 2.6%, compared with a 7.1% increase in the second quarter last year. Revenue was up 14.8% to $629 million and earnings per share rose 35% to $1.32. Analysts were expecting EPS of $1.23 on revenue of $614 million.
Despite the slowing same-store sales growth, the international business delivered strong overall revenue growth due to net openings of 178 new stores. Sales from international stores increased 15.2%, while sales from domestic stores were up 12.8%.
Domino's CEO J. Patrick Doyle acknowledged that international sales were disappointing, but said in the conference call that the issues, primarily in a few European markets, were "known and fixable." In the press release, he stated: "While international same store sales growth was slightly under our expectations, we remain very confident in our continued ability to generate best-in-class growth, and are encouraged by the strong store growth we are seeing from our international franchisees."
Domino's has been one of the most successful quick-serve restaurant businesses in recent years, being early to recognize the value of digital ordering technology. Today's stock price dip comes after a gain of 48% in 2016 and still leaves the stock up a robust 21% in 2017. Even if the 94th consecutive quarter of international same-store sales gains failed to satisfy investors, Domino's bigger picture remains the envy of the industry.
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