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Domino’s (DPZ) Q3 Earnings & Revenues Beat, Shares Up

Zacks

Domino's Pizza Inc. DPZ posted robust third-quarter 2016 results, wherein both earnings and revenues beat the respective Zacks Consensus Estimate. Consequently, the company’s shares gained almost 5% on Oct 18.

Performance in Detail

Adjusted earnings of 96 cents per share beat the Zacks Consensus Estimate of 90 cents by 6.7%. Earnings climbed 43.3% year over year on strong sales and lower share count.

Quarterly revenues increased 16.9% year over year to $567 million and surpassed the Zacks Consensus Estimate of $543 million by 4.4%. The improvement was primarily backed by higher supply chain revenues. Increased domestic franchise and company-owned store revenues along with higher international revenues on the back of growth in both comps and store count also led to the upside.


DOMINOS PIZZA Price, Consensus and EPS Surprise

Comps

Global retail sales (including total sales of franchise and company-owned units) were up 14.9% year over year. Strong comps from domestic and international stores supported the improvement. Excluding foreign currency impact, global retail sales gained 17.2%.

During the quarter, the company’s domestic store (including company-owned and franchise stores) comps were up 13% compared with 10.5% growth in the year-ago quarter. The company experienced year-over-year comps growth of 13.8% at company-owned stores compared with an 11.5% increase last year. Domestic franchise comps grew 12.9%, higher than 10.4% growth in the prior-year quarter.

Comps at international stores, excluding foreign currency translation, grew 6.6%. This was lower than the prior-quarter improvement of 7.7%.

Margins

The company’s operating margin expanded 140 basis points to 30.7% in the quarter. Higher consolidated operating margin was driven in part by the increase in sales and store growth, partially offset by higher general and administrative expenses, as well as higher interest expense as a result of the company's 2015 recapitalization.

Zacks Rank and Stocks to Consider

Currently, Domino's carries a Zacks Rank #2 (Buy).

Other well-performing restaurant stocks include Potbelly Corporation PBPB, Wingstop, Inc. WING and Darden Restaurants, Inc. DRI.

Potbelly currently sports a Zacks Rank #1 (Strong Buy). Its current-year growth estimate is pegged at 25.9% compared with the industry average of 8.7%.

Wingstop current-year growth estimate is pegged at 18.1% compared with the industry average of 8.7%. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Darden holds a Zacks Rank #2. It recorded positive earnings surprises in all of the four trailing quarters, with an average beat of 9.32%.

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