Excellent 4Q for Domino's Pizza - Analyst Blog
March 06 2013 - 4:10AM
Zacks
Domino's Pizza
Inc. (DPZ) reported fourth-quarter 2012 adjusted earnings
of 64 cents per share, well ahead of the Zacks Consensus Estimate
of 59 cents and the year-ago adjusted earnings of 52 cents. In full
year 2012, adjusted earnings were $2.02 per share versus $1.69 in
the prior year.
The strong quarterly results were
attributable to same-store sales (comps) growth in both
international and domestic markets along with unit growth, share
repurchase activity and margin expansion.
Total revenues nudged up 7.6% year
over year in the quarter to $539.7 million and surpassed the Zacks
Consensus Estimate of $530 million. The increase in revenues was
aided by improved volumes, enhanced comps at domestic and
international markets and higher international unit growth. In
2012, the company reported revenues of $1.7 billion, up 1.6% year
over year.
Inside the Headline
Numbers
During the reported quarter, the
company’s overall domestic comparable sales grew 4.7% with
company-owned units and franchises rising 2.5% and 4.9%,
respectively. However, comps took a higher jump in the overseas
markets recording growth of 5.2%. Global retail sales were up 9.7%
and 9.4% (excluding the effect of foreign currency
translation).
The company’s operating margin
expanded 90 basis points (bps) to 29.8% in the reported quarter,
driven by the rise in company-owned store’ operating margins and
flat commodity basket. Margin also gained from change in revenue
mix.
Store Count
During the reported quarter,
Domino’s opened and closed a respective of 49 and 18 franchised
stores, bringing the total domestic store count to 4,928.
Internationally, the company opened
223 and shut down 40 stores to bring the tally to a total of 5,327
international units.
Liquidity
At the end of the reported quarter, Domino’s Pizza had cash and
cash equivalents of $54.8 million versus $34.6 million in the third
quarter of 2012. Long-term debt (less current portion) in the
quarter was $1,536.4 million as compared with $1,542.5 million in
the prior quarter.
Share Repurchase &
Dividend
The company bought back as well as
retired 1,136,648 and 2,472,863 shares worth $45.5 million and
$88.2 million during the fourth quarter and full year 2012,
respectively.
The company is scheduled to pay its dividend of 20 cents per share
on Mar 29, of record at the close of business on Mar 15, 2013.
Outlook
In the long term, management
continues to expect domestic and international same-store sales
growth of 1% to 3% and 3% to 5%, respectively.
Our Take
Domino’s Pizza’s store level
economics are strong and are driving growth. Additionally, to drive
traffic, management continues to focus on menu innovation,
promotional activities and improved execution in its corporate and
franchise stores. However, unfavorable effect on currency
translation remains a huge cause of concern.
Domino’s Pizza currently retains a
Zacks Rank #2 (Buy). Another restaurateur Red Robin Gourmet
Burgers Inc.’s (RRGB) adjusted earnings in the fourth
quarter of 2012 were way ahead of the Zacks Consensus Estimate as
well as the year-ago quarter’s earnings. Red Robin Gourmet
currently carries a Zacks Rank #1 (Strong Buy).
Other restaurant companies like
Krispy Kreme Doughnuts, Inc. (KKD) and
Burger King Worldwide, Inc (BKW) both with a Zacks
Rank #2 (Buy) are expected to perform well, going ahead.
BURGER KING WWD (BKW): Free Stock Analysis Report
DOMINOS PIZZA (DPZ): Free Stock Analysis Report
KRISPY KREME (KKD): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
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