Earnings preview: What to expect from the Domino’s Pizza FY 2020 result

Here’s what to expect when Domino’s Pizza Enterprises Ltd (ASX:DMP) releases its full year results next week…

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Domino's Pizza share price

The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price has been an exceptionally strong performer in 2020.

The pizza chain operator’s shares have ignored the market volatility and zoomed an incredible 42% higher since the start of the year.

This means the Domino’s share price is trading within touching distance of its record high ahead of its full year results for FY 2020 on 19 August.

What is Domino’s expected to deliver in FY 2020?

Ahead of its results release, I thought I would take a look to see what the market expects Domino’s to deliver along with its pizzas in FY 2020.

According to a note out of Goldman Sachs, its analysts have increased their estimates to reflect stronger than expected updates from a number of its global peers.

Goldman Sachs is forecasting same store sales (SSS) growth of 4.5% for FY 2020, leading to total sales of $1,969.3 million. This comprises total ANZ sales of $717.4 million, Europe sales of $618.3 million, and Japan sales of $633.6 million.

It then expects this to lead to earnings before interest, tax, depreciation, and amortisation (EBITDA) of $310.8 million. This will be a 10.1% increase on the prior corresponding period.

And on the bottom line, Goldman has forecast net profit after tax of $152.4 million, which will be a 7.9% increase on the prior corresponding period. This is a touch short of the consensus estimate of $155.1 million.

The broker also expects Domino’s to grow its final dividend. It has forecast a 9.8% increase to 58 cents per share, with 75% franking.

How will its segments perform?

Goldman Sachs expects its ANZ segment to deliver 3% SSS growth in FY 2020, leading to EBITDA of $136 million. It estimates that there will be 832 stores in the ANZ market at the end of the period.

Even stronger growth is expected in Europe, with the broker forecasting SSS growth of 4.5%. It expects its 1,160 stores in the region to contribute $91.2 million in EBITDA. And in Japan, it has forecast a 7% increase in SSS, resulting in EBITDA of $96.4 million for the year.

Finally, corporate costs are expected to be $13 million for the year.

Should you invest?

I think Domino’s shares are arguably fully valued now. However, I still believe they could be a great option for investors that are looking for long term options. This is due to its bold store expansion and SSS targets over the coming years. Though, given how close its results release is, it might be prudent to wait until after that before investing.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Domino's Pizza Enterprises Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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