Domino's surges as Credit Suisse upgrades to 'outperform'

Domino’s Pizza Group shares surged after Credit Suisse upgraded the stock from ‘neutral’ to ‘outperform’ and added it to its Europe Small and Mid-Cap Focus List.

The investment bank said it had raised its 2016 and 2017 earnings per share forecasts by 15% to 19%.

“These changes are underpinned by 1) Domino's US guidance of 3-6% International LFLs (UK LFL has exceeded DPZ's Int'l by 360bps p.a. since 1999); 2) further scope to optimise the online channel (now 75-80% of orders but with scope for improved CRM, loyalty, increased basket size) and 3) our assessment of management remuneration – consensus implies c40% LTIP pay-outs vs 100% on our forecasts.”

It also there while annual store growth is expected to be unchanged at 50 per year, franchisee profits are up around 60% over the last two years.

“The payback has never been more compelling and implies forecast upside.”

Credit Suisse also said there is scope for capital returns with the German joint venture reducing cash flow risks.

Its target price was raised from 770p to 1,100p.

Shares in Domino's Pizza Group were up 76p (8.87%) to 932.5p at 1551 GMT.