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Domino's (DPZ) Q4 Earnings Top, Revenues Miss Estimates

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Domino's Pizza, Inc. (DPZ - Free Report) reported fourth-quarter fiscal 2022 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top and the bottom line increased on a year-over-year basis.

Following the announcement, shares of the company fell 8.5% in the pre-market trading session. Negative investor sentiments were witnessed as DPZ provided a lower-than-expected outlook for Global retail sales growth. The management cited a challenging macro environment, thereby impacting the company's U.S. delivery business.

Earnings & Revenue Discussion

During the quarter, Domino's reported adjusted earnings per share (EPS) of $4.43, beating the Zacks Consensus Estimate of $3.92. The figure increased 4.2% from $4.25 reported in the prior-year quarter.

Domino's Pizza Inc Price, Consensus and EPS Surprise

 

Domino's Pizza Inc Price, Consensus and EPS Surprise

Domino's Pizza Inc price-consensus-eps-surprise-chart | Domino's Pizza Inc Quote

 

Revenues of $1,392.2 million lagged the consensus mark of $1,436 million. The top line improved 3.6% on a year-over-year basis. The upside was mainly driven by higher supply-chain revenues (owing to a rise in market basket pricing), U.S. franchise royalties and fees and U.S. franchise advertising revenues (backed by the 2022 Store Sale and net store growth).

In fourth-quarter fiscal 2022, Domino's opened 361 stores, comprising 43 net new U.S. stores and 318 net new international stores.

Comps

Global retail sales (including total franchise and company-owned units) declined 1.1% on a year-over-year basis in the fiscal fourth quarter. The downside was primarily caused by lower international store sales (down 4.5% year over year). Sales at domestic stores increased 2.7% on a year-over-year basis. Excluding the foreign currency impact, global retail sales increased 5.2% from the prior-year quarter’s level.

For the fiscal fourth quarter, comps at Domino’s domestic stores (including company-owned and franchise stores) increased 0.9% from the year-ago quarter’s reading.

At domestic company-owned stores, Domino’s comps increased 3.4% year over year against a decline of 7.3% reported in the year-ago quarter. Domestic franchise store comps increased 0.8% year over year compared with a growth of 1.5% reported in the prior-year quarter.

Comps at international stores, excluding foreign currency translation, increased 2.6% year over year compared with a growth of 1.8% reported in the prior-year quarter.

Margins

During the fiscal fourth quarter, Domino’s’ gross margin contracted 90 basis points (bps) year over year to 36.8%. Net income margin in the quarter came in at 11.4%, down 20 bps from the prior-year quarter’s level.

Balance Sheet

As of Jan 1, 2023, cash and cash equivalents totaled $60.4 million compared with $114.8 million as of Sep 11, 2022. At the end of fourth-quarter fiscal 2022, Domino’s had $277.8 million of available borrowing capacity under its 2021 and 2022 variable funding notes, net of letters of credit issued of $42.2 million.

Long-term debt (less current portion) at the end of the fiscal fourth quarter came in at $4,967.4 million compared with $5,097.3 million reported in the previous quarter. Inventory amounted to $81.6 million compared with $72.6 million at the end of third-quarter fiscal 2022.

Capital expenditures during the quarter came in at $87.2 million compared with $50.5 million reported in the previous quarter.

The company announced a hike in its quarterly dividend payout. The company raised the quarterly dividend to $1.21 per share (or $4.84 annually) from the previous payout of $1.10 (or $4.40 annually). The hiked dividend will be paid out on Mar 30, 2023, to shareholders on record as of Mar 15, 2023. 

2022 Highlights

Total revenues in fiscal 2022 came in at $4,537.2 million compared with $4,357.4 million in 2021.

Gross margin in fiscal 2022 came in at $36.3% compared with 38.7% in 2021.
In 2022, adjusted EPS came in at $12.53 compared with $13.60 reported in the previous year.

2023 Guidance

In fiscal 2023, the company expects capital expenditures in the range of $90-$100 million. General and administrative expense is anticipated in the range of $425-$435 million.

Two-to three-year outlook for Global retail sales growth (excluding foreign currency impact) is anticipated in the range of 4-8%, down from the previous projection of 6-10%. Two-to three-year outlook for Global net unit growth is expected in the range of 5-7% compared with the previous projection of 6-8%.

Zacks Rank & Key Picks

Domino's currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Retail – Restaurants industry are Chuy's Holdings, Inc. (CHUY - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) and Brinker International, Inc. (EAT - Free Report) .

Chuy’s Holdings currently sports a Zacks Rank #1. CHUY has a trailing four-quarter earnings surprise of 19.1%, on average. Shares of CHUY have increased 25.3% in the past year.

The Zacks Consensus Estimate for Chuy’s Holdings 2023 sales and EPS suggests growth of 10.1% and 16.1%, respectively, from the corresponding year-ago period’s levels.

Arcos Dorados carries a Zacks Rank #2 (Buy). ARCO has a long-term earnings growth of 11.6%. Shares of the company have increased 11.1% in the past year.

The Zacks Consensus Estimate for Arcos Dorados’ 2023 sales and EPS suggests growth of 8.1% and 4.2%, respectively, from the year-ago period’s levels.

Brinker carries a Zacks Rank #2. EAT has a long-term earnings growth rate of 7.1%. The stock has gained 0.4% in the past year.  

The Zacks Consensus Estimate for Brinker’s 2024 sales and EPS suggests growth of 3.9% and 36.5%, respectively, from the year-ago period’s reported levels.

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