One of the takeaways from the Domino’s Pizza (US:DPZ) second-quarter earnings report on Monday is that the company had “soft sales.” That sentiment seems a bit overstated. The $1.02 billion in revenue the pizza giant reported was 4.6% lower than the $1.07 billion it reported in the same quarter in 2022. 

But, it did match the company’s revenue from the prior quarter. And if you look back to 2021, the $1.02 billion in revenue was essentially the same as the $1.03 billion it reported at that time. The point is that 2021, 2022 and 2023 have presented different challenges for consumers. Yet, through it all, Domino’s continues to deliver for its customers and for investors.

And while investors didn’t show much enthusiasm for the stock yesterday, as it barely eked out any gain, there is more to the story. 

Now up more than 10% in the last six months, DPZ stock scored an attractive 86.96 on Fintel’s Quality quant dashboard, which identifies high quality companies, based on their cash generating efficiencies. That’s just above food rival Yum Brands (US:YUM), which garnered a Quality score of 85.90, and fellow pizza maker Papa John`s International (US:PZZA) at 86.18.  

Why Earnings Matter Now More Than Ever

It’s an overstatement to say this is the most important earnings season ever. But at a time when analysts continue to point to an earnings recession, it’s impossible to ignore it. 

And in that regard, the story was much better. Domino’s reported earnings per share of $3.08 beat the consensus estimate by two cents. 

That might not get investors excited, but on a year-over-year basis, earnings were up 9.2%. Granted, that’s down from the 17% year/year earnings growth the company reported in the prior quarter, but it’s still basically double-digit growth. 

No matter how you slice it (no pun intended) pizza is a discretionary purchase. So it’s no small feat that Domino’s is showing that it has the ability to raise prices and expand its operating margins at a time when other companies are likely to post disappointing earnings.

Sell the News on Uber, but Buy the AI Story

One of the recent stories involving Domino’s Pizza is its partnership with Uber Technologies (US:UBER) that will give Domino’s access to Uber technology. This will allow Uber Eats and Postmates to include Domino’s delivery menus.

Domino’s will still be the company delivering the pizzas, but the company’s internal research shows that the move will give Domino’s access to a customer base. In theory, this will lead to top line growth. 

After an initial bump, any momentum about the Uber announcement is fading. But the bigger story, aside from earnings, is the company’s use of artificial intelligence in many areas of its business. 

In fact, the company’s investment in AI was on display on Super Bowl Sunday 2023 when it assisted in providing more accurate delivery times for over 3 billion pizzas for both customers and drivers. 

DPZ Looks Ready to Break Higher

Since July 1, DPZ stock has received 11 analysts’ updates with 11 price increases and 1 upgrade. Some of these price targets are below the current DPZ stock price. That’s why the consensus price target is for the stock to drop by about 2.7%. 

But this week’s positive earnings may give analysts a reason to move DPZ stock higher. Investors will have to wait a couple of weeks for those results to set in. 

In the meantime, investors should pay attention to the chart action. Earnings have climbed about 40% since 2019. That nearly mirrors the stock price growth over that period. 

Therefore, if earnings growth continues as expected, it’s not hard to see DPZ stock pushing past its current level of $385 which could put $400 in play.