Domino’s Pizza Q3 Earnings Report: Revenue Misses, Earnings Beat

10 oct.

Domino's Pizza Inc. (NYSE: DPZ), the largest pizza chain globally, has released its Q3 2024 financial results, revealing a mixed performance that left investors somewhat disappointed. Despite beating analyst expectations on earnings, Domino’s missed revenue estimates, causing the stock to slip. The company remains focused on its "Hungry for MORE" strategy, but the latest report underscores the challenges Domino's is facing in a pressured global marketplace.

Fundamental Overview
In Q3, Domino’s reported adjusted earnings per share (EPS) of $4.19, exceeding analyst projections of $3.63 by a significant margin. This 15.2% earnings beat reflects the strength of Domino's operations, particularly its cost management and international growth. However, revenue came in at $1.08 billion, falling short of Wall Street’s $1.1 billion estimate. This revenue miss highlights the broader industry challenges, particularly a competitive market and shifts in consumer spending.

Key Financial Metrics:
- Revenue: $1.08 billion (5.1% YoY growth, but 1.6% below expectations)
- EPS: $4.19, beating the $3.63 consensus
- Global Retail Sales Growth: 5.1% YoY, excluding currency impacts
- Same-Store Sales: U.S. up 3.0%, International up 0.8%
- Operating Income Growth: 5.7%, excluding FX impacts
- Net Store Growth: 72 new locations globally in Q3

While the growth in same-store sales and net store expansion demonstrates Domino’s resilience, the revenue shortfall suggests there may be limitations to growth in a highly competitive fast-food market. Additionally, rising operating costs and fluctuations in foreign exchange rates have impacted Domino’s international operations.

2024 Guidance and Future Outlook
Domino’s maintained its full-year 2024 guidance, projecting approximately 6% global retail sales growth and 8% growth in operating income. These targets align with the company’s consistent expansion strategy, which includes adding 800 to 850 new stores globally by year’s end. For 2025, the company expects sales and income growth to be broadly in line with 2024 projections, signaling confidence in its long-term strategy.

However, the revenue miss, combined with the challenges of maintaining growth in mature markets like the U.S., has caused some investors to reassess Domino’s trajectory. Domino’s already boasts 21,002 locations globally, making incremental growth more challenging.

Technical Outlook
From a technical perspective, Domino’s stock has entered a bearish zone following the release of its Q3 earnings. As of the time of writing, DPZ has dropped 2.52%, with the Relative Strength Index (RSI) sitting at 35, approaching the oversold region. This signals that the stock could be nearing a critical support level but is not yet undervalued enough for a bullish reversal.

Key technical indicators point to further weakness:
All major moving averages depict a bearish tone, with the stock trading below its 50-day and 200-day moving averages. This suggests downward momentum in the short to medium term.
The daily price chart shows a gap-down pattern that has yet to be filled, creating a technical overhang that could pressure the stock further.

DPZ is also trading within a falling wedge channel, a pattern often associated with continued downward momentum until a breakout occurs. A dip towards the $355 pivot could lead to a significant selloff, potentially triggering a broader decline if support levels fail to hold.

If Domino's stock fails to find support at current levels, it could face further downside, especially given the broader headwinds in the fast-food sector, including inflationary pressures and changing consumer preferences.

Conclusion
While Domino's continues to execute its growth strategy effectively, as evidenced by strong EPS growth and net store expansion, the revenue miss in Q3 signals challenges ahead. The stock's current technical outlook suggests caution is warranted, particularly as DPZ nears critical support levels. Investors should watch for a potential bounce if the stock hits oversold territory, but the risk of further downside looms if the broader market sentiment remains negative.

In the long term, Domino’s focus on expansion and operational improvements may help it navigate current headwinds, but short-term technical signals and the revenue shortfall indicate that the stock could face more turbulence before recovering.