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Domino’s Stock Fell More than 9% after Weak Q4 Earnings

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Fourth-quarter performance

Domino’s Pizza (DPZ) posted its fourth-quarter earnings before the market opened on February 21. For the quarter ending on December 30, the company posted an adjusted EPS of $2.62 on revenues of $1.08 billion. The company’s revenues increased 21.4% YoY (year-over-year), while its adjusted EPS rose 25.4%.

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Stock performance

During the fourth quarter, Domino’s didn’t meet analysts’ adjusted EPS estimate of $2.69 and revenue expectation of $1.10 billion. The company’s SSSG (same-store sales growth) also fell short of analysts’ expectations. Domino’s SSSG in the United States was 5.6% lower than analysts’ expectation of 6.9%. In the international market, the company’s SSSG was 2.4%—compared to analysts’ expectation of 4.1%.

Domino’s management stated that its aggressive expansion strategy had a negative impact on its 2018 SSSG by 1.0%–1.5% in the United States. The calendar shift, which shifted New Year’s Eve to the first quarter, lowered the company’s fourth-quarter SSSG in the United States and international markets by 0.5%. Domino’s lower-than-expected fourth-quarter results led to a fall in the stock price. By the close on February 21, Domino’s was trading at $253.01—a fall of 9.2% from the previous day’s closing price.

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YTD performance

Despite the decline on February 21, Domino’s was still trading 2.0% higher YTD (year-to-date). During the same period, Papa John’s (PZZA) and Yum! Brands (YUM) have both returned 3.2%. The broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), which invests 8.3% of its holdings in restaurant and travel companies, has returned 11.6% YTD.

Series overview

In this series, we’ll analyze Domino’s fourth-quarter results compared to analysts’ expectations. We’ll discuss analysts’ expectations for the next four quarters. We’ll end the series by looking at analysts’ recommendations and the company’s valuation multiples.

Next, we’ll discuss Domino’s fourth-quarter revenues.

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