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Domino's (DPZ) Q2 Earnings and Revenues Beat Estimates

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Domino's Pizza, Inc. (DPZ - Free Report) reported second-quarter 2020 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. While the company beat earnings estimates for the sixth straight quarter, it surpassed the same for revenues for the third consecutive quarter. Further, both earnings and revenues have improved year over year. The company also reported robust U.S. same-store sales. The second quarter also marked the 37th straight quarter of positive U.S. comparable sales and the 106th consecutive quarter of positive international comps.

Domino's robust results can primarily be attributed to solid digital ordering system and higher global retail sales.

Earnings & Revenues Discussion

Adjusted earnings in the quarter under review were $2.99 per share, which outpaced the Zacks Consensus Estimate of $2.25. The reported figure also improved 36.5% on a year-over-year basis. The bottom line was primarily driven by higher net income.

Quarterly revenues improved 13.4% year over year to $920 million, which beat the consensus mark of $899 million. Robust same-store sales and increase in store count (during the trailing four quarters) both in the United States and international markets drove second-quarter revenues. The company opened 859 stores in the trailing four quarters. In the second quarter, the company opened 84 stores, comprising 39 net new U.S. stores and 45 net new international stores. International franchise revenues also improved.

Dominos Pizza Inc Price, Consensus and EPS Surprise

Comps

Global retail sales (including total sales of franchise and company-owned units) improved 5.7% year over year in the second quarter. The upside can primarily be attributed to growth in sales at domestic stores (up 19.9%). However, sales declined 8.1% at international stores owing to store closure due to the pandemic.  Excluding foreign currency impact, global retail sales increased 8.1%.

In the second quarter, comps at Domino’s domestic stores (including company-owned and franchise stores) improved 1.6%. However, it was lower than the prior-year quarter’s improvement of 3.9%.

At domestic company-owned stores, Domino’s comps grew 16.1% year over year, higher than 3% in the year-ago quarter. Moreover, domestic franchise stores comps increased 16% compared with growth of 3.1% in the prior-year quarter.

Comps at international stores, excluding foreign currency translation, were up 1.3%. This was lower than improvement of 2.4% in the year-ago quarter.

Margins

Domino’s operating margin contracted 20 basis points (bps) year over year to 38.8% in the reported quarter. Moreover, the net income margin expanded 150 bps to 12.9%.

Balance Sheet

As of Jun 14, 2020, cash and cash equivalents totaled $248 million, up from $190.6 million as of Dec 29, 2019. Long-term debt at the end of the second quarter was $4,128.6 million, compared with $4,071.1 million as of Dec 29, 2018. Inventory amounted to $66.9 million at the end of the second quarter.

Cash flows from operating activities totaled $211.8 million at the end of second quarter. In the quarter under review, Domino’s incurred capital expenditures of $33.7 million.

The Zacks Rank #2 (Buy) company declared quarterly cash dividend of 78 cents, to be paid on Sep 30, 2020 to shareholder as record of Sep 15.

Other Key Picks

Some other top-ranked stocks in the same space include Dine Brands Global, Inc. (DIN - Free Report) , Papa John's International, Inc. (PZZA - Free Report) and Yum China Holdings, Inc. (YUMC - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dine Brands’ 2021 earnings are expected to soar 206.6%.

Papa John's has a three-five-year earnings per share growth rate of 8%.

Yum China beat estimates in each of the trailing four quarters, the average surprise being 62.9%.

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