For the third quarter of 2018, analysts expect Domino’s Pizza’s (DPZ) EPS to rise 37.5% to $1.75 compared to $1.27 in Q3 2017. EPS growth will most likely be driven by revenue growth, a lower effective tax rate, and share repurchases. However, some of the increase could be offset by a decline in its EBIT (earnings before interest and tax) margin.
Analysts are expecting Domino’s effective tax rate to fall from 33.6% in the third quarter of 2017 to 21.6% in the third quarter of 2018. From the beginning of the fourth quarter of 2017 to the end of the second quarter of 2018, Domino’s repurchased ~2.3 million shares at a cost of ~$370 million. At the end of the second quarter of 2017, it had ~$429.9 million in its share repurchase program.
Analysts expect the company’s EBIT margin to fall from 18.3% to 16.6% due to the adoption of a new accounting standard and higher G&A (general and administrative) expenses.
Peer comparisons and outlook
On July 18, Domino’s Pizza announced a quarterly dividend of $0.55 per share, which represents an annualized payout of $2.20. As of October 10, its dividend yield was 0.8% with the stock trading at $274.92. That same day, the dividend yields for Yum! Brands and Papa John’s were 1.61% and 1.67%, respectively.
In the next and final part of this series, we’ll look at analyst recommendations for DPZ stock.