Domino’s Pizza (DPZ) Down 3.8% Since Last Earnings Report: Can It Recover?

A month has passed since the last earnings report of Domino’s Pizza (DPZ). Shares have lost about 3.8% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Domino’s Pizza poised for a breakout? Before we dive into the recent reaction from investors and analysts, let’s take a quick look at the company’s most recent earnings report in order to get a better handle on the important factors influencing the situation.

Domino’s first-quarter earnings and revenues beat estimates

Domino’s Pizza reported impressive first-quarter fiscal 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. Both the top and bottom lines increased compared to the previous quarter.

During the quarter, the company benefited from its Hungry for MORE strategy, with increased sales, an expanded store presence and growing profits. It reported solid growth in the United States, supported by positive order volume in its fulfillment and delivery segments. The updated Domino’s Rewards loyalty program also had a positive impact.

DPZ highlights its marketing efforts on Uber Eats, which aims to achieve at least 3% of sales via this platform by the end of 2024. The company remains committed to improving franchisee profitability and expanding its store network to fuel growth.

Discussion about earnings and revenues

For the quarter, Domino’s adjusted earnings per share (EPS) was $3.58, topping the Zacks Consensus Estimate of $3.37. This number increased 22.2% from the $2.93 reported in the year-ago quarter.

Revenues of $1.08 billion beat the consensus estimate by 0.5%. Year-on-year, revenues increased by 5.9%. The positive effects can be attributed to higher supply chain revenues and U.S. licensing and franchise fees, as well as increased revenues from U.S. company-owned stores.

During the first quarter of fiscal 2024, Domino’s closed 203 gross stores and had 39 gross store closures.

Other metrics

Global retail sales (excluding foreign currency impact) increased 7.3% year-over-year in the fiscal first quarter. Growth was driven by higher international store sales (up 6.8% year-over-year) and U.S. store sales (7.8%).

In the first financial quarter, turnover in Domino’s domestic stores (including own and franchise stores) increased by 5.6% year-on-year.

In domestic company stores, Domino’s computers gained 8.5% year over year, compared with 7.3% a year earlier.

Domestic franchise store performance increased 5.5% year-over-year compared to 3.4% in the prior-year quarter.

International store calculation results, excluding foreign currency translations, improved 0.9% year-over-year compared to 1.2% in the prior-year quarter.

The story continues

Margins

In the fiscal first quarter, Domino’s gross margin increased 130 basis points (bps) year-over-year to 38.9%.

Net profit margin was 11.6%, an increase of 140 basis points compared to the same quarter last year.

Balance

As of March 24, 2024, cash and cash equivalents were $203.9 million compared to $114.1 million as of December 31, 2023. Long-term debt (net of current portion) at the end of the first fiscal quarter was $4. $97 billion compared to $4.93 billion at end-December 31, 2023. Inventories were $761 million compared to $83 million at end-December 31, 2023.

Capital expenditures for the quarter were $20.2 million, compared to $19 million reported in the prior-year quarter.

During the fiscal first quarter, the company repurchased and canceled 56,372 shares for a total cost of $25 million. As of March 24, 2024, DPZ identified the availability of $1.12 billion under its repurchase program.

The board of directors declared a cash dividend of $1.51 per share. The dividend will be paid on June 28, 2024 to shareholders of record as of June 14, 2024.

Long-term guidelines (2024-2028)

The company expects more than 7% annual growth in global retail sales. It predicts more than 1,100 annual net store additions worldwide. DPZ expects more than 8% of annual revenues from business growth.

How have estimates changed since then?

It turns out, revision estimates have flattened over the past month.

VGM results

Domino’s Pizza currently has a Strong Growth Score of A, although it lags well behind its Momentum Score of D. Following the exact same trajectory, the stock is rated D for value, putting it in the bottom 40% for this investment strategy.

Overall, the stock has a Total VGM Score of C. If you’re not focused on one strategy, this score should interest you.

Perspectives

Domino’s Pizza carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

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