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Domino’s Stock Fell 9% after Missing 1Q16 Earnings Estimates

Ralph Nathan

Domino's Pizza Starts Off 2016 on a Sour Note

Domino’s 1Q16 earnings

Michigan-based fast food restaurant chain Domino’s Pizza (DPZ) announced its 1Q16 results on April 28, 2016. The company posted revenues of $539.2 million and adjusted EPS of $0.89. The 1Q16 revenue represented a growth of 7.4% from 1Q15 while EPS grew by 9.6%.

Stock performance

Analysts were expecting revenues of $543.9 million and EPS at $0.98. As the results failed to meet analysts’ estimates, the share price declined, and Domino’s Pizza ended the day with its share price down by 9.9%. The company blamed the strong dollar and increased hourly wages for the decline in EPS, which fell short of analysts’ estimate by 9%.

Year-to-date performance

The better-than-expected 4Q15 results and the company’s guidance for fiscal 2016 had increased investor confidence, which in turn raised Domino’s share price by over 20%. However, lower-than-expected 1Q16 results led to a decline in Domino’s share price, which currently stands at 8.3% year-to-date. Since the beginning of 2016, Domino’s peers YUM! Brands (YUM), Papa John’s (PZZA), and Starbucks (SBUX) have returned 10.1%, 1.1%, and -6%, respectively. The comparative index, the Guggenheim S&P 500 Pure Growth ETF (RPG) has returned -1.9% year-to-date. RPG has 44% of its holdings in restaurants and travel companies.

Series overview

In this series, we’ll discuss DPZ’s 1Q16 performance by comparing it with the performance from the corresponding quarter in the previous year. We’ll also explore factors that could drive the company’s revenue in the coming quarters. Finally, we’ll conclude the series by looking at the company’s valuation multiple and analysts’ estimates and recommendations.

Let’s start by discussing Domino’s 1Q16 revenue.

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