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Category: Stock Market and Domino's Pizza's
Date: 8 October 2019 Stock Price: $252.30 We take a look at the 2nd quarter earnings report of their 2019 fiscal year of Domino's Pizza one of the world's leading pizza delivery companies with over 16 300 stores. The group has announced a massive share repurchase program.
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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 latest earnings report
- Total Revenues: $820.812 million (up from $785.965 million for the same quarter of the previous year)
- Total Revenues increased by 4.43% over the last 12 months
- Cost of sales: $504.561 million (up from $490.686 million for the same quarter of the previous year)
- Cost of sales increased by 2.8% over the last 12 months
- Net income: $86.373 million (up from $84.095 million for the same quarter of the previous year)
- Diluted earnings per share: $2.05 (up from $1.95 for the same quarter of the previous year)
- PE ratio: 30
- Dividend declared: $0.65
- Dividend yield: 1.03%
- Diluted weighted-average shares outstanding: 42.040 million (down from 43.067 million for the same quarter of the previous year)
- Cash and cash equivalents: $66.706 million
- Cash and cash equivalents per share: $1.58
- Cash and cash equivalents makes up 0.62% of Domino's market capital
- Cash and cash equivalents makes up 5.7% of Domino's total assets
- Accounts receivable: $185.403 million
- Accounts receivable makes up 15.9% of Domino's total assets
- Cash generated from operations (for 9 months): $324.596 million
- Cash generated from operations per share (for 9 months): $7.72
Domino's management commentary on the results and business outlook
ANN ARBOR, Mich., Oct. 8, 2019 /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, comprised of growth in global retail sales and earnings per share. Global retail sales increased 5.8% in the third quarter, or 7.5% without the negative impact of changes in foreign currency exchange rates. U.S. same store sales grew 2.4% during the quarter versus the prior year quarter, continuing the positive sales momentum in the Company's U.S. business. The international division also posted positive results, with same store sales growth of 1.7% during the quarter. The third quarter marked the 103rd consecutive quarter of international same store sales growth and the 34th consecutive quarter of U.S. same store sales growth. The Company had third quarter global net store growth of 214 stores, comprised of 40 net new U.S. stores and 174 net new international stores.
"It was a good quarter for Domino's, as we continue to lean on our fundamental strength against a unique competitive environment," said Ritch Allison, Domino's Chief Executive Officer. "Strong unit growth and positive comps yielded a solid and balanced quarter of retail sales growth across both the U.S. and international businesses. We remain steadfastly focused on driving profitable growth for the Domino's system, and most importantly, for our franchisees."
On October 4, 2019, the Company's Board of Directors declared a $0.65 per share quarterly dividend for shareholders of record as of December 13, 2019 to be paid on December 27, 2019.
Share Repurchases
During the third quarter of 2019, the Company repurchased and retired 384,338 shares of its common stock under its Board of Directors-approved share repurchase program for approximately $93.7 million, or an average price of $243.79 per share. As of September 8, 2019, the end of the third quarter, the Company's total remaining authorized amount for share repurchases was approximately $53.6 million.
On October 4, 2019, the Company's Board of Directors authorized a new share repurchase program to repurchase up to $1.0 billion of the Company's common stock. This repurchase program replaces the remaining availability of approximately $53.6 million under the Company's existing $750.0 million share repurchase program.
"It was a good quarter for Domino's, as we continue to lean on our fundamental strength against a unique competitive environment," said Ritch Allison, Domino's Chief Executive Officer. "Strong unit growth and positive comps yielded a solid and balanced quarter of retail sales growth across both the U.S. and international businesses. We remain steadfastly focused on driving profitable growth for the Domino's system, and most importantly, for our franchisees."
On October 4, 2019, the Company's Board of Directors declared a $0.65 per share quarterly dividend for shareholders of record as of December 13, 2019 to be paid on December 27, 2019.
Share Repurchases
During the third quarter of 2019, the Company repurchased and retired 384,338 shares of its common stock under its Board of Directors-approved share repurchase program for approximately $93.7 million, or an average price of $243.79 per share. As of September 8, 2019, the end of the third quarter, the Company's total remaining authorized amount for share repurchases was approximately $53.6 million.
On October 4, 2019, the Company's Board of Directors authorized a new share repurchase program to repurchase up to $1.0 billion of the Company's common stock. This repurchase program replaces the remaining availability of approximately $53.6 million under the Company's existing $750.0 million share repurchase program.
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 $76.40 a stock and its currently trading at $252.30 a stock. That's a very strong return of 230% 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.
Recent coverage of Domino's Pizza
The extract below discusses Domino's planned share buy back scheme
Domino's Pizza (DPZ - Get Report) Chief Financial Officer Jeff Lawrence announced Tuesday during the company's third-quarter earnings conference call that the pizza chain would launch a $1 billion share buyback program. Lawrence noted Domino's has returned $26.9 million to shareholders in the third quarter through its quarterly dividend of 65 cents a share.
"On average over the last 12 months we have not only generated more than $1 million per day in free cash flow but when you add our share repurchases and dividends together we have also returned more than $1 million per day to our shareholders," Lawrence said. Domino's reported weaker-than-expected third-quarter earnings Tuesday and same-store sales that disappointed analysts as fierce competition in the food delivery market continued to hit the sector's bottom line.
Read the full article here
Domino's Pizza (DPZ - Get Report) Chief Financial Officer Jeff Lawrence announced Tuesday during the company's third-quarter earnings conference call that the pizza chain would launch a $1 billion share buyback program. Lawrence noted Domino's has returned $26.9 million to shareholders in the third quarter through its quarterly dividend of 65 cents a share.
"On average over the last 12 months we have not only generated more than $1 million per day in free cash flow but when you add our share repurchases and dividends together we have also returned more than $1 million per day to our shareholders," Lawrence said. Domino's reported weaker-than-expected third-quarter earnings Tuesday and same-store sales that disappointed analysts as fierce competition in the food delivery market continued to hit the sector's bottom line.
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 the group's latest earnings and their outlook provided our valuation model provides a target (full value) at $201.40 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 (full value) price which in this case is $201.40. Thus we see a good entry point into Domino's stock at $180.90 or below. While the massive share repurchase program announced and discussed above in the article from TheStreet helped with their latest valuation as our valuation model took into account the possibility of almost 9% of Domino's stock being bought back by the group we still believe the stock of Domino's is overpriced and we cannot see the group maintaining their current lofty valuation and believe it will pull back in coming weeks and months.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $201.40. Thus we see a good entry point into Domino's stock at $180.90 or below. While the massive share repurchase program announced and discussed above in the article from TheStreet helped with their latest valuation as our valuation model took into account the possibility of almost 9% of Domino's stock being bought back by the group we still believe the stock of Domino's is overpriced and we cannot see the group maintaining their current lofty valuation and believe it will pull back in coming weeks and months.