Broker snap: Domino's is a 'core sector holding'

29th Sep 2010 11:24

Pizza delivery firm Domino's issued another upbeat trading update on Wednesday morning but strong execution by management is already reflected in the share price in the view of KBC Peel Hunt."Although the company has previously indicated an intention to distribute cash to the value or profit after tax, there is no announcement yet. We estimate that a buyback could be 1 - 2% enhancing. We do not expect this to coincide with directors' share sales as the directors sold 3m shares two weeks ago," Peel Hunt analyst Paul Hickman noted.The broker is upgrading its full year profit before tax forecasts by 2.5% to £36.6m; that translates to a similar percentage rise in earnings per share to 16.9p. "Today's upgrade gives 21% earnings growth against 25.9% for 2009. It would not surprise us if there were further upgrades in Q4 [fourth quarter]," Hickman said.The broker is sticking with its "hold" recommendation on the shares. "Although a core sector holding, we believe the shares may consolidate recent gains in the short term," it said.