Domino’s Pizza Stock Rose Due to Earnings Beat

Today, Domino’s Pizza (NYSE:DPZ) reported its fourth-quarter earnings, which ended on December 29, 2019. For the quarter, the company reported revenues of $1.15 billion, which beat analysts’ estimates of $1.13 billion. Domino’s adjusted EPS was $3.13, which beat analysts’ expectations of $2.98. Also, the company’s SSSG in the US was 3.4%, which beat analysts’ estimate of 2.3%. However, the company’s international SSSG was 1.7%, which fell short of analysts’ estimate of 2.1%. The impressive fourth-quarter performance appears to have led to a rise in the company’s stock price. Domino’s was trading 16.3% higher in today’s pre-market trading hours.

During the fourth quarter, Domino’s revenue grew 6.3% from $1.08 billion in the fourth quarter of 2018. The net addition of new franchised restaurants, positive SSSG, and growth in revenues from the supply chain segment drove the company’s revenue. In 2019, the company increased the restaurant count of its franchised restaurants by 1,154 units to 16,678. Also, the supply chain segment’s revenue grew 10.2% to $680.1 million in the fourth quarter. The net addition of the franchised restaurants and positive SSSG drove the segment’s revenue.

However, the company sold its 59 company-owned restaurants to franchisees in the second quarter of 2019. So, Domino’s operated 48 fewer company-owned restaurants during the quarter, which led to a fall of 16.5% from its company-owned restaurants segment. The unfavorable currency translation lowered the revenue from international franchised restaurants.

For the quarter, Domino’s Pizza reported a diluted EPS of $3.12. However, removing special items, the company’s adjusted EPS is $3.13. The EPS represents 19.5% growth from $2.62 in the same quarter of the previous year. The increased revenue from the US and international franchised restaurants, growth in supply chain volumes, and lower SG&A expenses drove the company’s EPS. However, higher interest expenses and the effective tax rate offset some of the gains in the EPS. YoY, the company’s interest expenses increased by 3.6% to $46.7 million.

Also, share repurchases in the last four quarters lowered the company’s number of shares outstanding, which drove the EPS. In the fourth quarter alone, the company repurchased 2.06 million shares for $593.9 million. By the end of the quarter, Domino’s had approximately $406.1 million under its share repurchase program.

On February 19, Domino’s management announced quarterly dividends of $0.78 per share. The dividends represent an increase of 20% from $0.65 per share that the company announced in the previous quarter. Domino’s will pay dividends on March 30 to shareholders recorded as of March 13.

For the next two to three years, Domino’s management expects its SSSG in the US to rise by 2%–5%. Management expects the company’s international SSSG to increase by 1%–4% excluding currency translation. Meanwhile, the company plans to increase the restaurant count by 6%–8%.

After delivering returns of 18.5% last year, Domino’s is trading 1.1% higher this year as of Wednesday. The company’s strong fourth-quarter performance could drive its stock price more. Meanwhile, McDonald’s (NYSE:MCD), Starbucks (NASDAQ:SBUX), and Yum! Brands (NYSE:YUM) have returned 9.1%, 2.5%, and 4.4%, YTD, respectively. McDonald’s and Starbucks reported their earnings last month. To learn more, read McDonald’s Beats Analysts’ Q4 Estimates.