Domino’s Pizza Faces Challenges Despite Solid Earnings
Analyzing Recent Performance and Future Prospects
With a market cap of $16.3 billion, Domino’s Pizza, Inc. (DPZ) from Ann Arbor, Michigan, stands as a significant force in the Quick-Service Restaurant (QSR) pizza sector. The company’s operations are divided into its U.S. Stores, International Franchise, and Supply Chain segments, allowing it to offer a variety of pizzas and additional menu items under the recognized Domino’s brand worldwide.
Over the past year, shares of Domino’s have not matched the performance of the broader market. DPZ has risen 22%, while the S&P 500 Index ($SPX) has gained 31.8%. In 2024, DPZ shares have increased by 14.6%, trailing the SPX’s 25.8% rise year-to-date.
When examining sector performance, DPZ has also fallen short of the Consumer Discretionary Select Sector SPDR Fund’s (XLY) 30.6% rise over the past year and a 23.1% return year-to-date.
Despite reporting better-than-expected Q3 adjusted earnings per share (EPS) of $4.19, DPZ shares fell 1.1% on October 10. The company’s Q3 revenue reached $1.1 billion, a 5.1% increase year-over-year, but it missed analysts’ expectations. Furthermore, Domino’s lowered its 2024 global retail sales growth forecast from a minimum of 7% to 6%. The company attributed this revised outlook to a “challenging macroeconomic environment,” which heightened investor worries. Additionally, the growth rate for international store comparable sales was disappointing, at only a slight increase compared to 3.3% the previous year.
For the current fiscal year ending December, analysts project that DPZ’s EPS will grow 14.7% year-over-year to $16.82. Notably, the company has surpassed consensus earnings estimates in the previous four quarters.
Out of 29 analysts who cover DPZ, the consensus rating is a “Moderate Buy.” This rating comprises 17 “Strong Buy” ratings, two “Moderate Buys,” nine “Holds,” and one “Strong Sell.”
This assessment shows a slight improvement compared to three months prior, when there were only 16 positions marked as “Strong Buy.”
On November 26, TD Cowen adjusted its price target for Domino’s Pizza to $515 while maintaining a “Buy” rating. This change reflects increased confidence in the company’s growth strategies for 2025, boosted by Domino’s “Hungry for More” plan, which suggests that U.S. same-store sales will surpass prior guidance in 2025.
At present, DPZ is trading below the average price target of $484.73, while the highest price target on Wall Street stands at $559, indicating a potential upside of 18.3%.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
