A month has gone by since the last earnings report for Domino's Pizza DPZ. Shares have lost about 3.8% in that time frame, underperforming the S&P 500. Will the recent negative trend continue leading up to its next earnings release, or is Domino's Pizza due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers. Domino's Q1 Earnings & Revenues Beat Estimates Domino's Pizza reported impressive first-quarter fiscal 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and the bottom line increased from the prior-year quarter’s figure. During the quarter, the company reported benefits from the Hungry for MORE strategy, registering heightened sales, expanding store presence and increasing profits. It reported solid growth in the United States, backed by positive order counts in carryout and delivery segments. The updated Domino’s Rewards loyalty program also contributed positively. DPZ underscores its marketing efforts on Uber Eats, with a goal of reaching 3% or more of sales through this platform by the 2024-end. The company remains committed to improving franchisee profitability and expanding its store network to drive growth. Earnings & Revenue Discussion In the quarter, Domino's reported adjusted earnings per share (EPS) of $3.58, surpassing the Zacks Consensus Estimate of $3.37. The figure rose 22.2% from $2.93 reported in the year-ago quarter.
Revenues of $1.08 billion beat the consensus mark by 0.5%. The top line increased 5.9% on a year-over-year basis. The upside can be attributed to higher revenues from the supply chain and U.S. franchise royalties and fees, along with increased revenues from U.S. company-owned stores.
In first-quarter fiscal 2024, Domino's had 203 gross store openings and 39 gross store closures.
Other Metrics
Global retail sales (excluding foreign currency impact) rose 7.3% on a year-over-year basis in the fiscal first quarter. The upside was driven by higher international store sales (up 6.8% year over year) and U.S. store sales (7.8%).
For the fiscal first quarter, comps at Domino’s domestic stores (including company-owned and franchise stores) rose 5.6% year over year.
At domestic company-owned stores, Domino’s comps gained 8.5% year over year compared with 7.3% a year ago.
Domestic franchise store comps jumped 5.5% year over year compared with 3.4% in the prior-year quarter.
Comps at international stores, excluding foreign currency translation, improved 0.9% year over year compared with 1.2% in the prior-year quarter.
Margins
In the fiscal first quarter, Domino’s gross margin expanded 130 basis points (bps) year over year to 38.9%.
Net income margin was 11.6%, up 140 bps from the year-ago quarter.
Balance Sheet
As of Mar 24,2024, cash and cash equivalents totaled $203.9 million compared with $114.1 million as of Dec 31,2023. Long-term debt (less current portion) at the fiscal first-quarter end was $4.97 billion compared with $4.93 billion at the end of Dec 31,2023. Inventory amounted to $761 million compared with $83 million at the end of Dec 31,2023.
Capital expenditure in the quarter totaled $20.2 million compared with $19 million reported in the prior year quarter.
During the fiscal first quarter, the company repurchased and retired 56,372 shares for an aggregated cost of $25 million. As of Mar 24,2024, DPZ stated the availability of $1.12 billion under its repurchase program.
Management declared a cash dividend of $1.51 per share. The dividend will be paid on Jun 28,2024, to shareholders of record as of Jun 14,2024.
Long-Term Guidance (2024-2028)
The company expects more than 7% annual global retail sales growth. It anticipates more than 1,100 annual global net store growth. DPZ expects more than 8% annual income from operation growth.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
Currently, Domino's Pizza has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Domino's Pizza has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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