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Domino's (DPZ) Q2 Earnings Top, Stock Down on Sales Miss
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Domino's Pizza, Inc. (DPZ - Free Report) reported mixed quarterly numbers for second-quarter 2018, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Following the results, investors took apprehensive stance resulting in share price decline of 2.4% yesterday. Lower-than-expected revenues and same-store sales growth led to the downside. However, in a year’s time, the stock has rallied 29.8% compared with the industry’s 2.4% increase.
Adjusted earnings of $1.85 per share outpaced the consensus mark of $1.74 and increased 39.4% on a year-over-year basis. The bottom-line improvement was driven by higher net income and lower diluted share count as a result of share repurchases.
Quarterly revenues increased 24% year over year to $779.4 million but missed the consensus mark of $787 million. Moreover, in the quarter under review, the company adopted new accounting standard that resulted in revenues recognition of $80.9 million from domestic franchise advertising. Also, increase in supply chain volumes owing to robust order and store count growth contributed to rise in revenues.
Comps
Global retail sales (including total sales of franchise and company-owned units) were up 12.6% year over year. This compared unfavorably with 11.8% growth in the year-ago quarter. The uptick was owing to strong comps at international stores (up 13.8%) and domestic stores (up 11.4%). Excluding foreign currency impact, global retail sales increased 11%.
In the second quarter, comps at Domino’s domestic stores (including company-owned and franchise stores) improved 6.9%. This compared unfavorably with 9.5% growth in the year-ago quarter.
At domestic company-owned stores, Domino’s experienced year-over-year comps growth of 5.1%, lower than 11.2% in the year-ago quarter. Also, domestic franchise stores comps grew 7% compared with 9.3% in second-quarter 2017.
Comps at international stores, excluding foreign currency translation, were up 4%. This was comparatively better than 2.6% in the year-ago quarter.
Notably, the second quarter marked the 29th consecutive quarter of positive U.S. comparable sales and 98th consecutive quarter of positive international comps.
Domino's Pizza Inc Price, Consensus and EPS Surprise
Domino’s operating margin expanded 700 bps year over year to 37.7% in the reported quarter. However, the net income margin contracted 60 bps to 9.9%. The uptick in the company’s net income was primarily driven by an increase in higher supply chain volumes, global royalty revenues and lower tax rates. However, the increase was partially offset by rise in net interest expenses owing to higher net debt levels and improved general and administrative expenses.
Balance Sheet
As of Jun 17, 2018, cash and cash equivalents were $157.8 million, up from $35.8 million as of Dec 31, 2017. Long-term debt at the end of the second quarter was $3,437 million, up from $3,121.5 million as of Dec 31, 2017. Inventory totaled $40.2 million at the end of the quarter.
Cash flows from operating activities, as of Jun 17, 2018, summed $154.7 million. In the quarter under review, Domino’s has spent $37.3 million on capital expenditures compared with $25.2 million in the prior-year quarter.
Carrols Restaurant has an impressive long-term earnings growth rate of 20%.
Papa Murphy's Holdings delivered positive earnings surprise in each of the trailing four quarters.
Wingstop has an impressive long-term earnings growth rate of 19.5%.
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Domino's (DPZ) Q2 Earnings Top, Stock Down on Sales Miss
Domino's Pizza, Inc. (DPZ - Free Report) reported mixed quarterly numbers for second-quarter 2018, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Following the results, investors took apprehensive stance resulting in share price decline of 2.4% yesterday. Lower-than-expected revenues and same-store sales growth led to the downside. However, in a year’s time, the stock has rallied 29.8% compared with the industry’s 2.4% increase.
Adjusted earnings of $1.85 per share outpaced the consensus mark of $1.74 and increased 39.4% on a year-over-year basis. The bottom-line improvement was driven by higher net income and lower diluted share count as a result of share repurchases.
Quarterly revenues increased 24% year over year to $779.4 million but missed the consensus mark of $787 million. Moreover, in the quarter under review, the company adopted new accounting standard that resulted in revenues recognition of $80.9 million from domestic franchise advertising. Also, increase in supply chain volumes owing to robust order and store count growth contributed to rise in revenues.
Comps
Global retail sales (including total sales of franchise and company-owned units) were up 12.6% year over year. This compared unfavorably with 11.8% growth in the year-ago quarter. The uptick was owing to strong comps at international stores (up 13.8%) and domestic stores (up 11.4%). Excluding foreign currency impact, global retail sales increased 11%.
In the second quarter, comps at Domino’s domestic stores (including company-owned and franchise stores) improved 6.9%. This compared unfavorably with 9.5% growth in the year-ago quarter.
At domestic company-owned stores, Domino’s experienced year-over-year comps growth of 5.1%, lower than 11.2% in the year-ago quarter. Also, domestic franchise stores comps grew 7% compared with 9.3% in second-quarter 2017.
Comps at international stores, excluding foreign currency translation, were up 4%. This was comparatively better than 2.6% in the year-ago quarter.
Notably, the second quarter marked the 29th consecutive quarter of positive U.S. comparable sales and 98th consecutive quarter of positive international comps.
Domino's Pizza Inc Price, Consensus and EPS Surprise
Domino's Pizza Inc Price, Consensus and EPS Surprise | Domino's Pizza Inc Quote
Margins
Domino’s operating margin expanded 700 bps year over year to 37.7% in the reported quarter. However, the net income margin contracted 60 bps to 9.9%. The uptick in the company’s net income was primarily driven by an increase in higher supply chain volumes, global royalty revenues and lower tax rates. However, the increase was partially offset by rise in net interest expenses owing to higher net debt levels and improved general and administrative expenses.
Balance Sheet
As of Jun 17, 2018, cash and cash equivalents were $157.8 million, up from $35.8 million as of Dec 31, 2017. Long-term debt at the end of the second quarter was $3,437 million, up from $3,121.5 million as of Dec 31, 2017. Inventory totaled $40.2 million at the end of the quarter.
Cash flows from operating activities, as of Jun 17, 2018, summed $154.7 million. In the quarter under review, Domino’s has spent $37.3 million on capital expenditures compared with $25.2 million in the prior-year quarter.
Domino’s carries a Zacks Rank #3 (Hold).
Key Picks
Better-ranked stocks in the same space include Carrols Restaurant Group, Inc. (TAST - Free Report) , Papa Murphy's Holdings, Inc. (FRSH - Free Report) and Wingstop Inc. (WING - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Carrols Restaurant has an impressive long-term earnings growth rate of 20%.
Papa Murphy's Holdings delivered positive earnings surprise in each of the trailing four quarters.
Wingstop has an impressive long-term earnings growth rate of 19.5%.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
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