Is the Domino’s Pizza Enterprises Ltd (ASX:DMP) share price in the buy zone ahead of its half year results? Here’s what this broker thinks…
The post What analysts expect from the Domino’s (ASX:DMP) first half result appeared first on The Motley Fool Australia. –
With earnings season now here, I thought I would take a look at what is expected from some of Australia’s most popular companies.
On this occasion, I’m going to take a look at Domino’s Pizza Enterprises Ltd (ASX: DMP).
What is expected from Domino’s in the first half of FY 2021?
According to a note out of Goldman Sachs, it is expecting the pizza chain operator to deliver a strong first half result on 17 February.
Its analysts expect solid same store sales growth to be complemented by operating leverage, driving above-average earnings growth for the period.
Goldman is forecasting same store sales growth of 8% across the group, leading to total network sales of $1,833.3 million and revenue of $1,077.9 million.
Thanks to margin expansion across all territories, the broker has pencilled in earnings before interest, tax, depreciation and amortisation (EBITDA) of $180.5 million for the half. This will be up 19.6% on the prior corresponding period.
Finally, on the bottom line, the broker expects Domino’s to report a 19.8% increase in net profit after tax to $89.3 million. This is expected to lead to an interim dividend of 73 cents per share, with 75% franking.
What will the drivers of the result be?
Goldman is expecting all sides of the business to contribute positively to Domino’s first half result.
In the ANZ market, it is forecasting same store sales growth of 6%, a 13-basis points increase in its EBITDA margin, and total stores of 846. This is expected to underpin an 8.7% increase in ANZ EBITDA to $77.6 million.
Over in Europe, the broker is also forecasting a 6% increase in same store sales. In addition, it has pencilled in total stores of 1,209 and a 55-basis points increase in its EBITDA margin, leading to a 22.9% lift in European EBITDA to $58.6 million.
Finally, the Japan segment is expected to be the star performer for the half. Goldman is forecasting same store sales growth of 15%, total stores of 745, and a 24-basis points improvement in margins. This results in a 35.9% increase in Japan EBITDA to $52.2 million.
Goldman Sachs currently has a conviction buy rating and $88.00 price target on its shares. Though, it is worth noting that the Domino’s share price is now trading above this at $92.95.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Dominos Pizza Enterprises Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.