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Domino’s Pizza Outperforms Analysts’ EPS Expectations in Q3 2018

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Oct. 18 2018, Updated 9:02 a.m. ET

EPS growth

Domino’s Pizza (DPZ) posted adjusted EPS of $1.95 in the third quarter, outperforming analysts’ consensus expectation of $1.75. Year-over-year, the company’s EPS rose $0.68, or 53.4%, over its EPS of $1.27 in the third quarter of 2017.

Of the $0.68 increase in the company’s EPS, its lower effective tax rate contributed $0.41, which included a $0.31 impact from tax reforms enacted in December 2017 and a $0.10 impact from tax benefits due to higher equity-based compensation. A lower diluted share count, primarily due to share repurchases in the last four quarters, contributed $0.17 to the company’s EPS in the quarter. The improvement in the company’s operations added $0.21.

However, some of the growth in Domino’s EPS was offset by unfavorable currency fluctuations, which lowered the company’s EPS by $0.02, and an increase in interest expenses, which negatively impacted the company’s EPS by $0.09.

During the quarter, the company’s effective tax rate declined to 15.3% compared to 33.6% in the third quarter of 2017. In the last four quarters, the company has repurchased ~2.6 million shares for ~$479 million.

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Peer comparison and outlook

In the same period, analysts expect Yum! Brands (YUM) to post EPS growth of 21.8%, while Papa John’s (PZZA) EPS are likely to fall 63.4%.

For the next four quarters, analysts expect Domino’s Pizza to post EPS of $9.01, a rise of 14.4% from its EPS of $7.88 in the corresponding four quarters of the previous year. Next, let’s look at analysts’ recommendations for Domino’s stock.

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