What’s happening: Domino's Pizza is scheduled to report its fourth-quarter results before the opening bell on Thursday, February 20. The stock, which underperformed over the past year, has spiked in the last five trading days.
What happened: Domino's shares came under intense pressure after the company reported very disappointing results for the second and third quarters. The stock has risen sharply over the past few days, as investors await Domino's fourth-quarter results with bated breath. After several disappointing quarters, expectations are high from the world’s largest pizza chain. In fact, over the past three months, revenue estimates for the quarter have been raised.
- The consensus revenue estimate stands at $1.13 billion, representing a 4.6% year-over-year increase.
- The estimate for earnings is $2.97 per share, with 13.4% growth from the same quarter in the previous year.
Why it matters: Domino’s has had a terrific run for almost a decade. The company has delivered strong growth, driven by new store openings and healthy same store sales growth. The share price has reflected this phenomenal performance, climbing from less than $10 in 2010 to closing the day near $300 on Wednesday. That’s almost 3,000% growth.
More recently, however, the Michigan-based company has struggled and stumbled. Growth has started to cool down and so has the stock.
Despite its large market share in the US and continued expansion in the Asian and Latin American markets, Domino’s growth weakened through most of 2019. Domino's warned of a slowdown in sales and lowered its medium-term sales outlook from 8-12% growth to 7-10% growth.
Citing the company’s strong fundamentals, analysts expect Domino's to have generated robust sales in the fourth quarter. The company has undertaken several sales initiatives, which may have benefited its performance. There have been reports of Domino's seeing growth in its already established markets of Japan, Canada, the UK, Italy and Switzerland as well as in emerging markets, including China, Brazil and Indonesia. The company has also started to gain momentum in countries like Australia, New Zealand and Russia.
On the other hand, currency headwinds are expected to negatively impact the fourth-quarter results. The company is also facing continued pressure from food delivery services like UberEats and DoorDash.
Domino’s Australian-listed company has already reported fourth-quarter results. The shares in Australia gained 15% on upbeat results.
How the shares have performed so far: Domino’s stock has underperformed the market in the past year, gaining around 6% versus a 22% rise in the broader S&P 500 index. The shares have spiked in the last five trading days, gaining close to 8%.
What to watch: With most companies reporting upbeat results this earnings season, Domino’s is under pressure to beat estimates this quarter. Management is also expected to provide details of the coronavirus impact on its business, since the company has 274 stores in China, although none are in the Hubei province.