Earnings Miss: Domino's Pizza Enterprises Limited Missed EPS By 11% And Analysts Are Revising Their Forecasts
It's been a pretty great week for Domino's Pizza Enterprises Limited (ASX:DMP) shareholders, with its shares surging 12% to AU$64.75 in the week since its latest interim results. Domino's Pizza Enterprises beat revenue forecasts by a solid 20% to hit AU$906m. Statutory earnings per share fell 11% short of expectations, at AU$0.81. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
View our latest analysis for Domino's Pizza Enterprises
Taking into account the latest results, the current consensus from Domino's Pizza Enterprises's eleven analysts is for revenues of AU$1.81b in 2020, which would reflect a meaningful 10% increase on its sales over the past 12 months. Statutory earnings per share are expected to expand 13% to AU$1.74. In the lead-up to this report, analysts had been modelling revenues of AU$1.57b and earnings per share (EPS) of AU$1.75 in 2020. It seems analyst sentiment has certainly become more bullish on revenues, even though they haven't changed their view on earnings per share.
Analysts increased their price target 18% to AU$57.34, perhaps signalling that higher revenues are a strong leading indicator for Domino's Pizza Enterprises's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Domino's Pizza Enterprises analyst has a price target of AU$72.00 per share, while the most pessimistic values it at AU$43.00. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Further, we can compare these estimates to past performance, and see how Domino's Pizza Enterprises forecasts compare to the wider market's forecast performance. We would highlight that Domino's Pizza Enterprises's revenue growth is expected to slow, with forecast 10% increase next year well below the historical 17%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 7.8% next year. Even after the forecast slowdown in growth, it seems obvious that analysts still thinkDomino's Pizza Enterprises will grow faster than the wider market.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Fortunately, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Domino's Pizza Enterprises going out to 2023, and you can see them free on our platform here..
You can also see whether Domino's Pizza Enterprises is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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