On Monday, Piper Sandler adjusted the price target for Domino's Pizza (NYSE:NYSE:DPZ) shares, bringing it down to $429 from the previous target of $436, while keeping a Neutral rating on the stock. The firm's decision comes in anticipation of the company's third-quarter earnings for 2024, which are expected to deliver a domestic same-store sales (SSS) growth of around +3.0%, slightly under the current consensus estimate of +3.8%.
The analyst from Piper Sandler pointed out that the consensus estimate has declined in recent weeks following comments from Domino's management at a conference last month. The firm forecasts that if Domino's reports a domestic SSS around the +3.0% mark for the third quarter, it would set a positive, albeit slightly conservative, tone for the fourth quarter of 2024 compared to current consensus estimates.
The analysis also suggests that while there may be concerns about a quarter-to-date slowdown compared to the third quarter, the implications remain that Domino's should be able to achieve a low single-digit percentage growth in domestic SSS for the fourth quarter of 2024. This estimate is based on the five-year geometric stack, which compares the current performance against that of 2019.
The firm's outlook indicates a cautious but steady performance for Domino's Pizza in the upcoming quarters, with expectations of continued growth, albeit at a potentially slower pace than previously anticipated. The adjusted price target reflects recent management commentary and investor expectations ahead of the official earnings release.
In other recent news, Domino's Pizza has experienced a series of adjustments in financial forecasts and ratings from various analyst firms. Evercore ISI cut the price target for Domino's shares to $480, citing lower sales estimates. Loop Capital maintained a Hold rating with a steady price target of $419, despite a slowdown in Domino's same-store sales growth during Q3 of 2024.
Stifel reaffirmed a Buy rating with a $480 price target, adjusting the full-year earnings per share (EPS) estimate slightly below the consensus. TD Cowen, while maintaining a Buy rating, lowered its price target for Domino's to $475 due to an anticipated slowdown in U.S. same-store sales.
Baird reduced its price target for Domino's to $535 but maintained an Outperform rating. These recent developments reflect changing expectations for Domino's financial performance based on revised earnings and revenue estimates.
InvestingPro Insights
As Domino's Pizza (NYSE:DPZ) approaches its third-quarter earnings report, InvestingPro data offers additional context to the Piper Sandler analysis. The company's revenue growth of 2.28% over the last twelve months, with a more robust 7.14% growth in the most recent quarter, aligns with the analyst's expectation of continued, albeit modest, same-store sales growth.
Domino's maintains a strong profitability profile, with an operating income margin of 18.5% and a gross profit margin of 28.44%. These figures suggest the company has been managing costs effectively, which could be crucial as it navigates the anticipated slower growth period.
InvestingPro Tips highlight that Domino's has raised its dividend for 10 consecutive years, with a current dividend yield of 1.42%. This consistent dividend growth, coupled with a 24.79% dividend increase in the last twelve months, may provide some reassurance to investors in light of the lowered price target.
It is worth noting that 12 analysts have revised their earnings downwards for the upcoming period, which corresponds with Piper Sandler's more conservative outlook. However, Domino's P/E ratio of 25.78 indicates that the market still has high expectations for the company's future earnings potential.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide valuable insights into Domino's Pizza's financial health and market position.
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