Please ensure Javascript is enabled for purposes of website accessibility

Domino's Pizza Smashes Expectations for the Fourth Quarter

By John Ballard - Feb 20, 2020 at 8:18AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The stock is soaring after sales and earnings beat analysts' estimates.

Domino's Pizza (DPZ -0.40%) handily beat estimates for sales and earnings when it reported fourth-quarter results on Thursday. The stock was up 17% in pre-market trading. 

The shares have been one of the better performing restaurant stocks in recent years, but 2019 saw competition from third-party deliverers (Uber Eats) pressure comparable store sales. The better-than-expected fourth quarter provided much-needed validation for Domino's "fortressing strategy."

A table with pizzas, utensils, and other items.

Image source: Domino's Pizza.

Robust earnings growth caps off a strong quarter

Global retail sales growth was a strong 7.6% for the quarter. That was driven in part by growth in U.S. same-store sales of 3.4%, with international comps up 1.7%. Also, Domino's opened 492 net new stores during the quarter. 

Even better was the performance on the bottom line. Earnings shot up 19.1% to $3.12 for the quarter, finishing the year up 14.5% to $9.56. This was driven by strong margin performance, which improved to 38.9%, up 70 basis points over the year-ago quarter. 

Overall, the positive results show that management's fortressing strategy to open more stores closer together is helping to combat competition and drive higher efficiency across the pizza chain. Management had blamed its weaker-than-expected comp-sales performance last year to the rollout of this strategy, as a short-term price to pay for long-term gain. 

Management reaffirmed the two-to-three-year outlook for global retail sales growth to be up 7% to 10%, U.S. same-store sales growth of 2% to 5%, international same-store growth of 1% to 4%, and global net unit growth of 6% to 8%. 

Investors also must have liked the 20% increase in the dividend payout to $0.78 per share. 

John Ballard owns shares of Uber Technologies. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Domino's Pizza, Inc. Stock Quote
Domino's Pizza, Inc.
$404.13 (-0.40%) $-1.62

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.