Domino's Pizza (NYSE: DPZ) earnings release for the 3rd quarter of their 2020 fiscal year
Category: Stock Market and Domino's Pizza's (DPZ)
Date: 8 October 2020 Stock Price of Domino's: $400 We take a look at the 3rd 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. Revenues for the 3rd quarter 2020 came in at $967.7 million and net income for the quarter came in at $99.19 million
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I am extremely proud of our global franchisees, operators and corporate teams for their relentless passion and energy as we continue to navigate through the pandemic - Ritch Allison, Domino's Chief Executive Officer."
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.
Quick facts about Domino's Pizza
Quick facts about Domino's Pizza
- Domino's Pizza is listed on the New York Stock Exchange under share code ticker: DPZ
- Domino's Pizza market capital: $14.8 billion (as at 12 June 2020)
- Number of employees of Domino's: 13 100
- Number of stores in the USA: 6 126
- Revenues in 2019: $3.62 billion
- Earnings per share in 2019: $9.56
- Shares in issue: 40.776 million
- Dividends paid during 2019: $2.60
- Cash on balance sheet: $190.6 million
Overview of Domino's Pizza's 2nd quarter 2020 earnings report
- Total Revenues: $967.719 million (up from $820.812 million for the same quarter of the previous year)
- Total Revenues increased by 17.8% over the last 12 months
- Cost of sales: $605.738 million (up from $504.561 million for the same quarter of the previous year)
- Cost of sales increased by 20% over the last 12 months
- Some margin squeeze on Domino's Pizza as their cost of sales increased at a faster rate than their revenues
- Net income: $99.129 million (up 14.7% from $86.373 million for the same quarter of the previous year)
- Diluted earnings per share: $2.49 (up from $2.05 for the same quarter of the previous year)
- PE ratio: 40.1
- Dividend declared: $0.78
- Dividend yield: 0.78%
- Diluted weighted-average shares outstanding: 39.791 million (down from 42.040 million for the same quarter of the previous year)
- Cash and cash equivalents: $330.719 million
- Cash and cash equivalents per share: $8.31
- Cash and cash equivalents makes up 2.1% of Domino's market capital
- Cash and cash equivalents makes up 20.4% of Domino's total assets
- Accounts receivable: $229.403 million
- Accounts receivable makes up 14.2% of Domino's total assets
- Cash generated from operations for the first 3 quarters of 2020: $370.399 million
- Cash generated from operations per share for first 3 quarters of 2020: $9.30
Domino's management commentary on their 3rd quarter 2020 earnings
ANN ARBOR, Mich., Oct. 8, 2020 /PRNewswire/ -- Domino's Pizza, Inc. (NYSE: DPZ), the largest pizza company in the world based on global retail sales, announced results for the third quarter. Global retail sales increased 14.4% in the third quarter, or 14.8% excluding foreign currency impact. U.S. same store sales grew 17.5% during the quarter versus the year-ago period and were positively impacted by customer ordering behavior during the COVID-19 pandemic, continuing the positive sales momentum in the Company's U.S. stores business. The international business also posted positive same store sales results, with growth of 6.2% during the quarter. The third quarter marked the 107th consecutive quarter of international same store sales growth and the 38th consecutive quarter of U.S. same store sales growth.
During the quarter, the Company reported 209 gross new stores and 83 net new stores, comprised of 44 net new U.S. stores and 39 net new international stores. The Company's net store growth reflects the closure of 126 stores, primarily in India. The number of temporary store closures in certain of the Company's international markets declined during the third quarter of 2020. Based on information reported to the Company by its master franchisees, the Company estimates that as of October 5, 2020, there were fewer than 300 international stores temporarily closed.
Diluted EPS for the third quarter was $2.49, up 21.5% over the prior year quarter.
On October 6, 2020, the Company's Board of Directors declared a $0.78 per share quarterly dividend for shareholders of record as of December 15, 2020 to be paid on December 30, 2020.
"I am extremely proud of our global franchisees, operators and corporate teams for their relentless passion and energy as we continue to navigate through the pandemic," said Ritch Allison, Domino's Chief Executive Officer. "Our strong third quarter results once again demonstrated our focus on value, service, quality and innovation to meet customer needs."
During the quarter, the Company reported 209 gross new stores and 83 net new stores, comprised of 44 net new U.S. stores and 39 net new international stores. The Company's net store growth reflects the closure of 126 stores, primarily in India. The number of temporary store closures in certain of the Company's international markets declined during the third quarter of 2020. Based on information reported to the Company by its master franchisees, the Company estimates that as of October 5, 2020, there were fewer than 300 international stores temporarily closed.
Diluted EPS for the third quarter was $2.49, up 21.5% over the prior year quarter.
On October 6, 2020, the Company's Board of Directors declared a $0.78 per share quarterly dividend for shareholders of record as of December 15, 2020 to be paid on December 30, 2020.
"I am extremely proud of our global franchisees, operators and corporate teams for their relentless passion and energy as we continue to navigate through the pandemic," said Ritch Allison, Domino's Chief Executive Officer. "Our strong third quarter results once again demonstrated our focus on value, service, quality and innovation to meet customer needs."
Liquidity and Use of Cash Update
As of September 6, 2020, the Company had approximately:
Net cash provided by operating activities was $370.4 million during the three fiscal quarters of 2020. The Company invested $51.2 million in capital expenditures during the three fiscal quarters of 2020. Free cash flow, as reconciled below to net cash provided by operating activities, as determined under accounting principles generally accepted in the United States of America ("GAAP"), was approximately $319.2 million during the three fiscal quarters of 2020
As of September 6, 2020, the Company had approximately:
- $330.7 million of unrestricted cash and cash equivalents;
- $4.11 billion in total debt; and
- $160.0 million of available borrowings under its $200.0 million variable funding notes, net of letters of credit issued of $40.0 million and borrowings outstanding of less than $0.1 million.
Net cash provided by operating activities was $370.4 million during the three fiscal quarters of 2020. The Company invested $51.2 million in capital expenditures during the three fiscal quarters of 2020. Free cash flow, as reconciled below to net cash provided by operating activities, as determined under accounting principles generally accepted in the United States of America ("GAAP"), was approximately $319.2 million during the three fiscal quarters of 2020
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 $110 a stock and its currently trading at $400 a stock. That's a very strong return of 281% provided to Domino's stockholders over the last 5 years.
The stock of Domino's is trading at a lot closer to its 52 week high of $435.385 than it is to its 52 week low of $247.50 which to us is a clear indication that the short term sentiment and momentum of Domino's stock is very positive at this point in time.
The stock of Domino's is trading at a lot closer to its 52 week high of $435.385 than it is to its 52 week low of $247.50 which to us is a clear indication that the short term sentiment and momentum of Domino's stock is very positive at this point in time.
Domino's Pizza (DPZ) stock vs Papa Johns (PZZA) stock over last 5 years
The image below shows the stock price history of Domino's Pizza (DPZ) and Papa Johns (PZZA) over the last 5 years. And from the image it is clear that the stock of Domino's Pizza has easily outperformed that of Papa Johns, even though both are active in the Pizza franchise industry.
Recent coverage of Domino's Pizza
The extract below discusses Domino's upcoming earnings release as obtained from CNBC.com
Domino’s Pizza on Thursday reported that its quarterly revenue rose 17.9%, led by more U.S. customers ordering pizza delivery during the coronavirus pandemic. But earnings fell short of expectations, hurt by higher costs, and shares fell more than 6% in morning trading. The stock, which has a market value of $15.8 billion, has risen 36% so far this year.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
The pizza chain reported fiscal third-quarter net income of $99.1 million, or $2.49 per share, up from $86.4 million, or $2.05 per share, a year earlier. Analysts surveyed by Refinitiv were expecting earnings of $2.79 per share. While the pandemic lifted sales, it also boosted costs for the company. Higher wages for frontline workers, personal protective equipment and enhanced sick pay cost the company an estimated $11 million. And increased sales also resulted in higher compensation based on performance. Volatility in the commodity markets caused by the pandemic pushed ingredient prices, including cheese, 3.8% higher
Read the full article here
Domino’s Pizza on Thursday reported that its quarterly revenue rose 17.9%, led by more U.S. customers ordering pizza delivery during the coronavirus pandemic. But earnings fell short of expectations, hurt by higher costs, and shares fell more than 6% in morning trading. The stock, which has a market value of $15.8 billion, has risen 36% so far this year.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $2.49 vs. $2.79 expected
- Revenue: $968 million vs. $953 million expected
The pizza chain reported fiscal third-quarter net income of $99.1 million, or $2.49 per share, up from $86.4 million, or $2.05 per share, a year earlier. Analysts surveyed by Refinitiv were expecting earnings of $2.79 per share. While the pandemic lifted sales, it also boosted costs for the company. Higher wages for frontline workers, personal protective equipment and enhanced sick pay cost the company an estimated $11 million. And increased sales also resulted in higher compensation based on performance. Volatility in the commodity markets caused by the pandemic pushed ingredient prices, including cheese, 3.8% higher
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 3rd quarter 2020 earnings report? Based on Domino's Pizza's 2nd quarter 2020 earnings report our valuation model provides a target price (full value price) at $217.70 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 $217.70. Thus we see a good entry point into Domino's stock at $195.90 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 therefore rate Domino's Pizza (DP) as a sell
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 $217.70. Thus we see a good entry point into Domino's stock at $195.90 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 therefore rate Domino's Pizza (DP) as a sell
Next earnings release of Domino's Pizza
It is expected that Domino's Pizza will release their 4th quarter 2020 earnings report in late January 2021