Domino's Pizza Faces Unfavorable Setup Despite Lower Valuation, RBC Says

MT Newswires Live04-15

Domino's Pizza (DPZ) will likely deliver a Q1 top- and bottom-line "slightly below consensus," RBC Capital Markets said in a Wednesday note.

According to RBC, the company has a "slightly unfavorable" risk/reward due to the "potential for downwards estimate revisions, despite depressed valuation," the note said.

Potentially increasing macroeconomic pressures may prompt the company's management to revise down domestic 2026 same-store sales growth slightly from the 3% guidance despite the possibility of benefitting from competitor closures in Q1, RBC said.

Yum Brands' (YUM) Pizza Hut and Papa John's (PZZA) are expected to close about 500 stores combined this year, with the majority of those closures coming in Q1, the investment firm said.

RBC also expects Domino's Pizza to post 2.7% US same-store sales growth in Q1 compared with consensus estimates for 3.0% growth.

Meanwhile, the investment firm sees the company posting in-line international same-store sales growth, even as high oil prices may have an impact on consumer spending. RBC noted the company's direct Middle East exposure only represents low single digits of its system sales.

RBC has a sector perform rating on Domino's Pizza and lowered its price target to $400 from $425.

Price: 368.12, Change: -1.05, Percent Change: -0.29

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