Wednesday May 27, 2020, 00:00:00
By Mark Kalinowski
After yesterday’s (Tuesday’s) market close, Domino’s (DPZ; Buy, $360.16) provided a business update. Following our May 12th report in which we raised our Q2E samestore sales forecast to a sell-side high of +8.6% (it is still the high sell-side forecast as of 4 PM Eastern time yesterday, according to Consensus Metrix), Domino’s comments that its April 20-May 17 U.S. same-store sales rose by +20.9%, placing Q2-to-date (through May 17th) at +14.0%.
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Tuesday May 12, 2020, 00:00:00
By Mark Kalinowski
With this report, we upgrade our rating on the shares of Domino’s (DPZ) to Buy (from Neutral). Our upgrade is based on multiple factors, including: (1) we raise our Q2E U.S. same-store sales forecast by +190 basis points, to +8.6% — not only above sellside consensus (according to Consensus Metrix) of +6.8%, but also the new “highon-the-sell-side” forecast, (2) this summer’s new U.S. product launch could prove to be a hit, (3) while we are not modeling a meaningful international sales rebound, it could happen as more countries come back on line with their operations (for example, as of late April, only about 70% of Domino’s France stores were back open), (4) Domino’s company-owned stores (which represent about 2% of the worldwide store base, but which we calculate generate approximately 10%-11% of worldwide operating profits) should see their operating margins helped by lower cheese costs over Q2E-Q4E, and (5) while we are not predicting another massive shutdown of stores/lockdown orders/etc. for 6-12 months from now, if COVID-19 issues lead to such a circumstance several months from now — particularly over winter 2020-21; winters are relatively friendlier to respiratory viruses — Domino’s delivery & carryout focused business model should be more resistant than nearly all other business models in the restaurant industry.
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Thursday April 23, 2020, 00:00:00
By Mark Kalinowski
Earlier today, Domino’s (DPZ; Neutral, $364.00) reported Q1 EPS of $3.07, well above our $2.35 forecasts and sell-side consensus (according to Consensus Metrix) of $2.32. The earnings beat is largely due to tax rate, which came in at -3.7% (i.e., a helpful tax rate) vs. our 19.0% forecast and consensus of 18.7%. If the Q1 tax rate had been 19.0% (and nothing else in the Q1 income statement was changed), we estimate that Q1 EPS would have been about $2.40 — an earnings beat, but nevertheless not quite as good as what appeared at first glance. On today’s conference call, management commented that the Q1 tax rate reflected “tax benefits on equitybased compensation,” and that it anticipates continued volatility in the tax rate going forward.
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