Domino's Pizza (NYSE: DPZ) earnings release for the 1st quarter of their 2020 fiscal year
Category: Stock Market and Dominos Pizza's
Date: 24 April 2020 Stock Price: $370.64 We take a look at the 1st quarter earnings report of their 2020 fiscal year of Domino's Pizza one of the world's leading pizza delivery companies with over 16 300 stores. How has Covid-19 related lockdowns across the world affected their earnings.
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About Domino's Pizza
Founded in 1960, Domino’s Pizza is the largest pizza company in the world based on retail sales, with a significant business in both delivery and carryout pizza. It ranks among the world’s top public restaurant brands with a global enterprise of more than 16,300 stores in over 85 markets. Domino’s had global retail sales of over $13.5 billion in 2018, with nearly $6.6 billion in the U.S. and more than $6.9 billion internationally. In the second quarter of 2019, Domino’s had global retail sales of over $3.2 billion, with over $1.6 billion in the U.S. and over $1.6 billion internationally. Its system is comprised of independent franchise owners who accounted for 98% of Domino's stores as of the second quarter of 2019. Emphasis on technology innovation helped Domino’s achieve more than half of all global retail sales in 2018 from digital channels.
In the U.S., Domino’s generates over 65% of sales via digital channels and has developed several innovative ordering platforms, including Google Home, Facebook Messenger, Apple Watch, Amazon Echo and Twitter – as well as Domino’s HotSpots®, an ordering platform featuring over 200,000 unique, non-traditional delivery locations. In late 2017, Domino’s began an industry-first test of self-driving vehicle delivery, and in June 2019 announced a partnership with Nuro, furthering its exploration and testing of autonomous pizza delivery.
Overview of Domino's Pizza's 1st quarter 2020 earnings report
- Total Revenues: $873.102 million (up from $835.963 million for the same quarter of the previous year)
- Total Revenues increased by 4.44% over the last 12 months
- Cost of sales: $532.945 million (up from $513.674 million for the same quarter of the previous year)
- Cost of sales increased by 3.76% over the last 12 months
- Net income: $121.602 million (up 31% from $92.650 million for the same quarter of the previous year)
- Diluted earnings per share: $3.07 (up from $2.20 for the same quarter of the previous year)
- PE ratio: 30.1
- Dividend declared: $0.78
- Dividend yield: 0.84%
- Diluted weighted-average shares outstanding: 39.609 million (down from 42.133 million for the same quarter of the previous year)
- Cash and cash equivalents: $200.801 million
- Cash and cash equivalents per share: $5.07
- Cash and cash equivalents makes up 1.37% of Domino's market capital
- Cash and cash equivalents makes up 14.44% of Domino's total assets
- Accounts receivable: $219.199 million
- Accounts receivable makes up 15.77% of Domino's total assets
- Cash generated from operations: $95.358 million
- Cash generated from operations per share: $2.41
Domino's management commentary on the results and business outlook
ANN ARBOR, Mich., April 23, 2020 /PRNewswire/ -- Domino's Pizza, Inc. (NYSE: DPZ), the largest pizza company in the world based on global retail sales, announced results for the first quarter. Global retail sales increased 4.4% in the first quarter, or 5.9% excluding foreign currency impact. U.S. same store sales grew 1.6% during the quarter versus the year-ago period, continuing the positive sales momentum in the Company's U.S. stores business. The international business also posted positive results, with same store sales growth of 1.5% during the quarter. The first quarter marked the 105th consecutive quarter of international same store sales growth and the 36th consecutive quarter of U.S. same store sales growth
During the quarter, the Company opened 178 gross new stores and 69 net new stores, comprised of 30 net new U.S. stores and 39 net new international stores. The Company's net store growth includes the closure of its South Africa market, unrelated to the COVID-19 pandemic, comprising 71 stores in total.
First quarter diluted EPS was $3.07, up 39.5% over the prior year quarter. On April 21, 2020, the Company's Board of Directors declared a $0.78 per share quarterly dividend for shareholders of record as of June 15, 2020 to be paid on June 30, 2020. "In a time of unprecedented change in our industry, I am pleased to report that Domino's is in a very strong financial position, both at the brand and franchisee levels," said Ritch Allison, Domino's Chief Executive Officer. "We can't predict the full impact of COVID-19 on the broader economy and we don't know how consumer behavior and restaurant purchasing patterns may evolve coming out of this crisis. What I do know is that our franchisees and teams in the U.S. and across the globe will remain focused on safely serving our customers and our communities in this time of need. I have great confidence in our people and our ability to manage through this crisis, and I remain optimistic about the long-term potential of the Domino's brand."
Company Withdraws Two- to Three-Year Outlook
Due to the current uncertainty surrounding the global economy and the Company's business operations considering COVID-19, the Company is withdrawing its two-to three-year outlook for global retail sales growth, U.S. same store sales growth, international same store sales growth and global net unit growth.
Share Repurchases
During the first week of the first quarter of 2020, the Company repurchased and retired 271,064 shares of its common stock in open market repurchases under its Board of Directors-approved share repurchase program for approximately $79.6 million. As of March 22, 2020, the Company's total remaining authorized amount for share repurchases under such program was approximately $326.6 million.
Liquidity
As of March 22, 2020, the Company had approximately:
First quarter diluted EPS was $3.07, up 39.5% over the prior year quarter. On April 21, 2020, the Company's Board of Directors declared a $0.78 per share quarterly dividend for shareholders of record as of June 15, 2020 to be paid on June 30, 2020. "In a time of unprecedented change in our industry, I am pleased to report that Domino's is in a very strong financial position, both at the brand and franchisee levels," said Ritch Allison, Domino's Chief Executive Officer. "We can't predict the full impact of COVID-19 on the broader economy and we don't know how consumer behavior and restaurant purchasing patterns may evolve coming out of this crisis. What I do know is that our franchisees and teams in the U.S. and across the globe will remain focused on safely serving our customers and our communities in this time of need. I have great confidence in our people and our ability to manage through this crisis, and I remain optimistic about the long-term potential of the Domino's brand."
Company Withdraws Two- to Three-Year Outlook
Due to the current uncertainty surrounding the global economy and the Company's business operations considering COVID-19, the Company is withdrawing its two-to three-year outlook for global retail sales growth, U.S. same store sales growth, international same store sales growth and global net unit growth.
Share Repurchases
During the first week of the first quarter of 2020, the Company repurchased and retired 271,064 shares of its common stock in open market repurchases under its Board of Directors-approved share repurchase program for approximately $79.6 million. As of March 22, 2020, the Company's total remaining authorized amount for share repurchases under such program was approximately $326.6 million.
Liquidity
As of March 22, 2020, the Company had approximately:
- $200.8 million of unrestricted cash and cash equivalents;
- $4.10 billion in total debt; and
- $158.6 million of available borrowings under its $200.0 million variable funding note facility, net of letters of credit issued of $41.4 million. As previously disclosed, subsequent to the first quarter, the Company borrowed $158.0 million under its variable funding note facility.
Domino's Pizza (NYSE: DPZ) stock price history
The image below, obtained from Google, shows the stock price history of Domino's Pizza over the last 5 years. And it's been a very good time for Domino's stockholders.5 years ago the stock was trading at around $114 a stock and its currently trading at $360.74 a stock. That's a very strong return of 216.4% provided to Domino's stockholders over the last 5 years.
The stock of Domino's is however trading at a lot closer to its 52 week low of $220.90 than it is to its 52 week high of $302.04 which to us is a clear indication that the short term sentiment and momentum of Domino's stock is negative at this point in time.
The stock of Domino's is however trading at a lot closer to its 52 week low of $220.90 than it is to its 52 week high of $302.04 which to us is a clear indication that the short term sentiment and momentum of Domino's stock is negative at this point in time.
People are more interested in Domino's pizza deliveries than they are in its stock price
The graphic below from Google Trends shows that over the last 12 months there has been far more Google searches for Dominos Pizza delivery compared to Domino's pizza stock price. Guess there are more people eating Domino's pizza than what there are Domino's Pizza investors
Recent coverage of Domino's Pizza
The extract below discusses Domino's upcoming earnings release as obtained from TheStreet.com
Domino's Pizza (DPZ) beat Wall Street's first-quarter earnings expectations Thursday, but the No. 1 worldwide pizza chain based on retail sales withdrew its outlook due to uncertainty caused by the coronavirus pandemic shutdown. Shares of the Ann Arbor, Mich., company at last check were off 1.6% to $377.50. They'd risen 5.1% in Wednesday trading.
The company said it was withdrawing its two- to three-year outlook for global retail-sales growth, U.S. same-store-sales growth, international same-store-sales growth and global net-unit growth due to the coronavirus outbreak. Domino's reported net income of $121.6 million, or $3.07 a share, up from $92.7 million, or $2.20, in the year-earlier quarter. The latest figure beat the consensus estimate of $2.32 a share in a FactSet survey of analysts.
The profit growth was driven primarily by a lower effective tax rate, higher royalty revenue from U.S. and international franchised stores, and higher supply-chain volumes, Domino's said.
Revenue totaled $873.1 million, a 4.4% increase from the year-earlier total, and came in ahead of FactSet's consensus of $669 million. The increase was due mainly to higher global store counts during the trailing four quarters as well as U.S. and international same-store sales growth, resulting in higher supply-chain and U.S. and international franchise revenue.
Read the full article here
Domino's Pizza (DPZ) beat Wall Street's first-quarter earnings expectations Thursday, but the No. 1 worldwide pizza chain based on retail sales withdrew its outlook due to uncertainty caused by the coronavirus pandemic shutdown. Shares of the Ann Arbor, Mich., company at last check were off 1.6% to $377.50. They'd risen 5.1% in Wednesday trading.
The company said it was withdrawing its two- to three-year outlook for global retail-sales growth, U.S. same-store-sales growth, international same-store-sales growth and global net-unit growth due to the coronavirus outbreak. Domino's reported net income of $121.6 million, or $3.07 a share, up from $92.7 million, or $2.20, in the year-earlier quarter. The latest figure beat the consensus estimate of $2.32 a share in a FactSet survey of analysts.
The profit growth was driven primarily by a lower effective tax rate, higher royalty revenue from U.S. and international franchised stores, and higher supply-chain volumes, Domino's said.
Revenue totaled $873.1 million, a 4.4% increase from the year-earlier total, and came in ahead of FactSet's consensus of $669 million. The increase was due mainly to higher global store counts during the trailing four quarters as well as U.S. and international same-store sales growth, resulting in higher supply-chain and U.S. and international franchise revenue.
Read the full article here
Domino's (NYSE: DPZ) latest stock valuation
So what is Domino's Pizza (NYSE: DPZ) stock worth based on the release of their latest earnings report? Based on Domino's Pizza's 1st quarter 2020 earnings report our valuation model provides a target price (full value price) at $193.20 a stock. We therefore believe that the stock is overvalued.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target price (full value price) which in this case is $193.20. Thus we see a good entry point into Domino's stock at $173.90 or below. We believe that Domino's stock will pull back in coming weeks and months to levels closer to our target price (full value price).
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target price (full value price) which in this case is $193.20. Thus we see a good entry point into Domino's stock at $173.90 or below. We believe that Domino's stock will pull back in coming weeks and months to levels closer to our target price (full value price).
Next earnings release of Domino's Pizza
It is expected that Domino's Pizza will release their 2nd quarter 2020 earnings report in late July 2020