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


A month has passed since Domino's Pizza's (DPZ) last reported earnings, and shares have fallen 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 due for a breakout? Before we dive deeper 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 Pizza first-quarter profit and revenue beat expectations

Domino's Pizza reported strong first-quarter fiscal 2024 earnings, with earnings and revenue beating the Zacks Consensus Estimate. Sales and earnings increased compared to the same period a year ago.

During the quarter, the company reported success with its Hungry for MORE strategy, recording higher sales, expanding store footprint and increasing profits. Strong growth was reported in the U.S., driven by increased order volume in the takeaway and delivery segments. The company's renewed Domino's Rewards loyalty program also contributed positively.

DPZ is focusing its marketing efforts on Uber Eats, with the goal of increasing sales through the platform to more than 3% by the end of 2024. The company remains focused on improving franchise profitability and expanding its store network to drive growth.

Revenue and Revenue Discussions

Domino's Pizza reported adjusted earnings per share (EPS) of $3.58 for the quarter, beating the Zacks Consensus Estimate of $3.37. The figure was up 22.2% from $2.93 in the year-ago period.

Revenues of $1.08 billion beat consensus estimates by 0.5%. Sales increased 5.9% year over year. The increase was driven by higher revenues from supply chain and U.S. franchise royalties and fees, as well as higher revenues from U.S. company-operated stores.

In the first quarter of fiscal 2024, Domino's Pizza opened a total of 203 new stores and closed a total of 39 stores.

Other indicators

Global retail sales, excluding the impact of foreign currency, increased 7.3% year over year in the first quarter, driven by increases in international store sales (up 6.8% year over year) and U.S. store sales (up 7.8%).

In the first quarter, Domino's Pizza's domestic same-store sales (including company-operated and franchised stores) increased 5.6% compared to the same period last year.

Among domestic company-operated stores, Domino's Pizza's same-store sales increased 8.5%, compared with 7.3% growth in the same period last year.

Domestic franchised same-store sales increased 5.5% compared to a 3.4% increase in the same period last year.

Same-store sales at international stores, excluding foreign currency translation, increased 0.9% year over year, compared with an increase of 1.2% in the same period a year ago.

margin

Domino's first-quarter gross margin increased 130 basis points (bps) from the same period last year to 38.9%.

Net profit margin was 11.6%, up 140 basis points from the same period last year.

Balance sheet

As of March 24, 2024, total cash and cash equivalents were $203.9 million, an increase from $114.1 million as of December 31, 2023. Long-term debt (excluding current portion) at the end of the first quarter was $4.97 billion, an increase from $4.93 billion as of December 31, 2023. Inventory was $761 million, an increase from $83 million as of December 31, 2023.

Capital expenditures for the quarter totaled $20.2 million, up from $19.0 million in the same period last year.

The company repurchased and retired 56,372 shares for an aggregate purchase price of $25 million during the quarter. As of March 24, 2024, DPZ announced that it had $1.12 billion available under its share repurchase program.

Management has declared a cash dividend of $1.51 per share. The dividend is payable on June 28, 2024 to shareholders of record on June 14, 2024.

Long-term guidance (2024-2028)

The company expects its global retail sales to grow at least 7% annually. It also expects its global net store count to grow by more than 1,100 stores annually. DPZ expects annual revenue growth to be more than 8% from business growth.

How have estimates changed since then?

After all, estimate revisions have remained flat over the past month.

VGM Score

Currently, Domino's Pizza has a high Growth Score of A, but lags far behind in Momentum with a D. In exactly the same vein, the stock has a Value Score of D, placing it in the bottom 40% of this investment strategy.

Overall, the stock has an overall VGM Score of C. If you don't focus on one strategy, this is the score to look at.

Outlook

Domino's Pizza has a Zacks Rank of #3 (Hold), and we expect the stock to deliver expected returns in the coming months.

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