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Domino's Pizza, Inc. (DPZ) Q4 Earnings Preview: DPZ Needs To Deliver Perfection

 February 27, 2013 01:49 PM

(By Rich Bieglmeier) Domino's Pizza, Inc. (DPZ) will host their Fourth Quarter 2012 Earnings Conference Call on Thursday, February 28, 11 a.m. Eastern. Earnings will be released prior to the conference call. Wall Street anticipates that DPZ will earn $0.60 for the quarter. iStock expects the pizza maker to report earnings that will beat Wall Street's consensus number. The iEstimate is $0.61 – a 1 cent upside surprise.

Domino's Pizza is the recognized world leader in pizza delivery. As of the third quarter 2012, Domino's operated a network of 10,040 franchised and Company-owned stores in the U.S. and over 70 international markets.

[Related -Domino's Pizza, Inc. (DPZ): Up 80% In Last Year And Still Surging On Record Results]

We sure do love us some pizza.

In the past four years, Domino's has delivered 15 bullish earnings surprises with one disappointment. The average upside surprise for DPZ is 11.02% with a max of 23.53% with a low of 2.17%.  The pepperoni slid off the pie at 4.08% for the lone miss.

Share performance in the days surrounding earnings aren't as tasty as the number of bullish surprises, but profitable trades still overate in the last four years. Gains were made – at the waistline – 75% of the last 16 quarterly checkups. The average uptick is 8.95% with four of the 12 topping 10%. Meanwhile, the stock has gotten roughed up twice, falling 10.60% and 20.30%; however, the pair of other red days was almost unnoticeable, losing a microscopic 0.6% and 0.7%.

[Related -Stocks Poised For Further Highs]

Heading into Thursday's announcement, DPZ is expensive on a historical trailing 12 month (TTM) P/E basis. As we type, Domino's is trading with a TTM P/E of 26.49, which is pretty damn close to its 5-year high of 26.84 and nearly double the average TTM P/E of 13.79.

Analysts expect Domino's to grow earnings-per-share (EPS) by 15.70% next year while the pizza company trades with a forward P/E of 20. It seems to iStock that DPZ is priced for perfection and a beat and revise up could be necessary to juice the stock higher Thursday morning.

According to Google Trends, hitting peak performance could be a difficult task. Year-over-year queries for "Dominos Pizza" are down 23.43% and down 7.5% compared to Q3 2012.  Some of the traffic may have been lost to mobile searches. However, this metric is still important as "Domino's incredible mobile ordering, along with traditional online ordering, makes up 30 percent of Domino's sales," according to the company's 10Q.

Domino's earned $0.52 for last year's 4th quarter and $0.43 for Q3 2012. If Google Trends are indicative, the consensus of 60 cents could be a difficult hurdle to clear.

Overall: Domino's Pizza, Inc.'s (DPZ) history and iEstimate suggest the pizza maker will post another bullish earnings surprise. However, Google Trends and P/E based valuation could mean something special needs to be delivered for DPZ shares to heat up.
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