Domino's Pizza Q3 Results Top Forecasts But Shares Drop – Investor's Business Daily

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Domino’s Pizza (DPZ) on Thursday reported third-quarter earnings and revenue that exceeded Wall Street estimates.

XAutoplay: On | OffEstimates: Earnings per share of $1.22, a 27% jump, on 11% revenue growth to $631 million. System-wide same-store sales were expected to rise 6.5%, while international franchise comps were seen up 3.2%, according to Consensus Metrix.

Results: EPS of $1.27 on revenue of $643.6 million. Domestic same-store sales jumped 8.4%, and international comp sales grew 5.1%.

Stock: Shares fell 1.3% to 206.51 in premarket trading on the stock market today. On Wednesday, Domino’s shares had crept closer to a 221.68 buy point in a cup-shaped base. Rival Papa John’s (PZZA) and Pizza Hut parent Yum Brands (YUM) weren’t active yet early.

The earnings come shortly after Domino’s Pizza Group, a large franchisee for the pizza chain in the U.K. and elsewhere in Europe, reported Q3 same-store sales growth of 8.1% in the U.K., topping estimates, according to a Nomura-Instinet research note.

Weaker international results, particularly in parts of Europe, weighed on Domino’s second-quarter results, which were reported in July.

CEO Patrick Doyle, during the company’s earnings call at that time, cited weaker consumer confidence in U.K. and issues around “making sure we’re getting value right” in the nation. But he said that even as food-delivery options grow in the U.K. and the U.S., business hadn’t been affected. And he said at the time that the problems in Europe were “known and fixable.”

Shares at that time also sank in part on weaker operating margins, the sense that the company’s tax rate accounted for much of its EPS, and that no accelerated payouts were announced after a recapitalization.

IBD’S TAKE: While delivery has largely been pizza’s domain, more options, from chains like McDonald’s (MCD) and Jack in the Box (JACK), have become available.

Stephens analyst Will Slabaugh, in a research note on Wednesday, said that worries over Domino’s international difficulties were likely to be “short-lived.” While he said that the company was heading into more difficult comparisons in the U.S., he liked the company’s prospects, citing “explicit value” in the company’s $5.99 Mix and Match offering and a “growing technology and delivery moat.”

Still, Credit Suisse analyst Jason West said that with more companies trying to compete on food delivery, there was little room for error, and that any dent in same-store sales could further worry Wall Street.

“When companies such as McDonald’s (MCD) and Amazon (AMZN) are entering your core business … we get concerned,” he said in a research note.


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