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Posco Holdings Inc ADR(PKX-N)

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The 2 Stocks on Everyone's Minds Monday Morning

Motley Fool - Mon Jul 24, 2023

Stocks have been on a roll lately, with the Dow Jones Industrial Average (DJINDICES: ^DJI) having put together a streak of 10 straight days of advances. Stock index futures were mixed in premarket trading, but many market participants still seem convinced that this week's news will be positive. Investors will be on the lookout in particular for the next move from the Federal Reserve, which could raise interest rates again after taking a break in June.

Earnings season will hit its peak this week, and even though many of the biggest companies won't report their results until later in the week, a few got an early jump on getting their results to their shareholders. Domino's Pizza (NYSE: DPZ) and Posco (NYSE: PKX) are in very different industries, but each has seen both challenges and opportunities, and gave their perspective on the economic conditions they face. Here's why Domino's and Posco are in the spotlight Monday morning.

Domino's looks to heat up

Shares of Domino's Pizza were up about 1% in premarket trading Monday morning. Investors seemed to be reasonably comfortable with the pizza restaurant chain leader's second-quarter financial results, even though there were a few signs of sluggishness in the numbers.

Domino's reported a decrease in revenue of 3.8% year over year in the second quarter, with sales coming in at $1.02 billion. The company attributed much of the sales decline to falling revenue from its supply chain operations, and order volumes were lower as well. In addition, Domino's refranchised more than 100 stores in Arizona and Utah toward the end of 2022, and that shifted some of the pizza chain's revenue mix. U.S. same-store sales were up just 0.1% from year-ago levels, and even a 3.6% rise in currency-adjusted comps from international stores wasn't enough to generate a huge amount of growth.

However, Domino's did see considerable success on the bottom line. Earnings of $3.08 per share were up more than 9% from year-ago levels. The chain opened 253 new stores worldwide while closing just 56, bringing its total count to 20,205 across the globe.

CEO Russell Weiner said that Domino's remains on track to restore delivery growth in the U.S. market, and the deal that it recently made with Uber Technologies could help accelerate its recovery. For now, investors seem content, but they'll want to see the fruits of the new collaboration become evident before too long.

Posco soars on electric vehicle battery hopes

Elsewhere, shares of Posco Holdings were up 17% in premarket trading. The Korean steel company has invested considerable resources toward building up its capacity to provide EV battery materials to automakers, and shareholders seem pleased with the move despite second-quarter financial results that were considerably weaker than in the year-ago period.

Posco reported a 13% drop year over year in revenue to 20.1 trillion Korean won. Profits fell even more sharply, with net income dropping 56% from year-ago levels to roughly 800 billion won. However, investors appeared to focus more on sequential improvement in certain areas, which they hope means that Posco is moving in the right direction.

Posco expects to invest nearly $100 billion to move beyond its past emphasis on steel by 2030. In addition to pursuing electric vehicle materials, Posco is also looking at hydrogen as a potential growth area.

Few U.S. investors have paid much attention to Posco, but its recent gains are attracting attention now. With the stock at its best levels in more than a decade, the Korean steel giant has a lot to prove, but shareholders like what they're seeing so far.

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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Domino's Pizza and Uber Technologies. The Motley Fool has a disclosure policy.

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