Food stock to watch: Domino’s Pizza, Inc. (NYSE: DPZ)

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Domino’s Pizza, Inc. (NYSE: DPZ) stock fell over 1.4% (as of 11:34 am GMT-4; Source: Google finance) as the company posted lower than expected results for the third quarter of FY 19. The consolidated operating margin for the third quarter expanded to 38.5% from 37.6% in the prior year quarter, and was positively affected due to the New York sale and higher revenues from the global franchise business. During the first three quarters of 2019, the company has generated net cash provided by operating activities of approximately $325 million. After deducting for capex, the company has generated free cash flow of more than $280 million. This reflects on average, of more than $1 million in free cash flow generated per day.

DPZ in the third quarter of FY 19 has reported the adjusted earnings per share of $2.05, missing the analysts’ estimates for the adjusted earnings per share of $2.07, according to the Factset consensus. The company had reported the adjusted revenue growth of 4.4 percent to $820.8 million in the third quarter of FY 19, missing the analysts’ estimates for revenue of $823 million. U.S. same-store sales rose 2.4%, compared with a FactSet consensus for growth of 2.7%. The same-store sales for the international division have grown 1.7% during the quarter.

Meanwhile, previously, DPZ, had forecast global retail sales growth in the range of 8% to 12% over the next three-to-five years, U.S. same-store sales growth was expected to be 3% to 6% and international same-store sales growth of 3% to 6%. Now the company is forecasting 7% to 10% global retail sales growth over the next two-to-three years with U.S. same-store sales growth of 2% to 5% and international same-store sales growth of 1% to 4%.

Additionally, the company has approved a new share buyback program of up to $1 billion. In the fiscal third quarter the company has returned $26.9 million to shareholders in form of a 65 cents quarterly dividend.  The company has on average from the last one year has generated more than $1 million per day in free cash flow and has also returned more than $1 million per day to the shareholders.

For FY 19, the company expects that the capex investments will be in the range of $95 million to $100 million. DPZ expect the G&A expense will be in the range of $380 million to $385 million for full year 2019.

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