Domino’s Earnings: Loyalty Program Changes and Uber Eats Ramp Should Drive Sales Turnaround

Wide-moat Domino’s posted solid third-quarter results, with $1.03 billion in sales and $4.18 in diluted EPS ($3.20 when excluding a non-cash gain on investment and differential tax rates) edging our $1.01 billion and $3.11 estimates, respectively. While unit growth of 1.8% in the U.S. and 4.3% in the firm’s international segment fell slightly short of our 1.8% and 5.5% respective forecasts, this was largely reflective of the disaggregation of Domino’s 143 Russian stores; underlying international segment growth of 5.9% and roughly 1,000 annual gross store openings are consistent with the firm’s development cadence over the past few years. On balance, we expect to lower our $397 fair value estimate by a low-single-digit percentage as we balance the impact of time value, the development shortfall, softer-than-expected company-owned store margins, and a slightly more positive outlook for fiscal 2024.