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A month has gone by since the last earnings report for Domino’s Pizza (DPZ). Shares have added about 1.19 % in the past month, roughly in-line with the market in that time frame.
Will the recent trend continue leading up to their next earnings release, or is the stock due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Domino’s Pizza Tops Q3 Earnings and Revenue Estimates
Domino’s Pizza posted robust third-quarter 2016 results, wherein both earnings and revenues beat the respective Zacks Consensus Estimate.
Performance in Detail
Adjusted earnings of $0.96 per share beat the Zacks Consensus Estimate of $0.90 by 6.7%. Earnings climbed 43.3% year over year on strong sales and lower share count.
Quarterly revenues increased 16.9% year over year to $567 million and surpassed the Zacks Consensus Estimate of $543 million by 4.4%. The improvement was primarily backed by higher supply chain revenues. Increased domestic franchise and company-owned store revenues along with higher international revenues on the back of growth in both comps and store count also led to the upside.
Global retail sales (including total sales of franchise and company-owned units) were up 14.9% year over year. Strong comps from domestic and international stores supported the improvement. Excluding foreign currency impact, global retail sales gained 17.2%.
During the quarter, the company’s domestic store (including company-owned and franchise stores) comps were up 13% compared with 10.5% growth in the year-ago quarter. The company experienced year-over-year comps growth of 13.8% at company-owned stores compared with an 11.5% increase last year. Domestic franchise comps grew 12.9%, higher than 10.4% growth in the prior-year quarter.
Comps at international stores, excluding foreign currency translation, grew 6.6%. This was lower than the prior-quarter improvement of 7.7%.
The company’s operating margin expanded 140 basis points to 30.7% in the quarter. Higher consolidated operating margin was driven in part by the increase in sales and store growth, partially offset by higher general and administrative expenses, as well as higher interest expense as a result of the company’s 2015 recapitalization.
How have estimates been moving since then?
Following the release and in the last month, investors have witnessed an upward trend for fresh estimates. In the past month, there have been six revisions higher for the current quarter compared to one lower. This has produced a relatively positive trend which is evident in the chart below:
At this time, Domino’s Pizza’s stock has a nice Growth score of ‘B’, though it is lagging a lot on the momentum front with a ‘D’. Charting a somewhat similar path, the stock was allocated a grade of ‘F’ on the value side, putting it in the lowest quintile for this investment strategy.
Overall, shares of DPZ have a pretty weak reading on the fundamental front, as the company has a grade of just ‘D’ for its VGM score, suggesting there are better choices out there for investors.
While estimates have been broadly trending upward for the stock, the magnitude of these revisions looks promising. It comes with little surprise shares of Domino’s have a Zacks Rank # 1 (strong buy) and we are expecting outperformance from DPZ in the next few months.
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DOMINOS PIZZA (DPZ): Free Stock Analysis Report
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