Morgan Stanley Is Eating Domino's Pizza Post-Earnings

In a report published Wednesday, Morgan Stanley analyst John Glass argued that shares of Domino's Pizza, Inc. DPZ have further upside as accelerating comps and market share gains will continue into 2015.

Glass noted that Domino's Pizza 11.1 percent comp momentum in the fourth quarter outpaced its industry peers and showed no signs of slowing. The analyst added that even though the company doesn't provide quarter-to-date guidance, the strong performance is expected to continue through the first half of 2015.

Glass added that the company has now completed approximately 2,200 store remodels (with another 1,000 identified for 2015) which is vital to "keeping the system fresh" as carryout/walk-in business continues to grow.

In terms of food inflation, Glass wrote that cheese and pork commodity prices are falling and the company expects 2 percent to 4 percent deflation in 2015. Every 10 percent change in cheese price correlates to a 1.5 cent impact on earnings per share.

The strong U.S. dollar continues to weigh on the company's bottom line and based on Glass' calculations, foreign exchange will impact operating profits by more than $14 million in 2015, a figure that is higher than the company's $8 million to $12 million guidance.

Glass raised his fiscal 2015 earnings per share estimate to $3.39 from a previous $3.36 on higher domestic comps, which are partially offset by higher foreign exchange impact due to the strong dollar.

Shares remain Equal-weight rated with a $97 price target, with a "bull case" price target of $112.