Domino's Pizza's (DPZ) first-quarter results will likely miss Wall Street's estimates, with economic challenges expected to drive a downgrade to the pizza restaurant operator's same-store sales outlook for the US, RBC Capital Markets said in a note e-mailed Wednesday.
The brokerage expects Domino's to post 2.7% first-quarter comparable sales growth in the US, below analysts' consensus estimate that RBC put at 3%. Internationally, RBC is looking at a 0.8% rise, compared with the Street's expectation for a 0.7% increase.
RBC forecasts Domino's first-quarter earnings per share at $4.22, lower than the $4.30 market view.
The company in February pegged full-year US comparable sales growth at 3%. RBC anticipates a slight guide down as "potentially intensifying macro pressures since the (Feb. 23) earnings call could incrementally weigh on management's outlook," RBC analyst Logan Reich said.
The brokerage expects a 2.5% gain in the US this year, compared with market expectations that call for a 2.7% rise.
"While Domino's is arguably a beneficiary of trade down, carryout, which has been the key SSS growth driver post-COVID, could be relatively more impacted by rising gas prices than delivery," Reich said.
Energy prices have spiked following the US-Iran conflict that has disrupted shipments through the Strait of Hormuz. While recent peace talks in Pakistan ended without a deal, a two-week ceasefire between Washington and Tehran still holds.
"Elevated oil prices could start to impact international markets more broadly, particularly importers like China and India which have been key growth drivers of the segment," Reich wrote.
RBC said US delivery is buoyed by incremental DoorDash (DASH) transactions, though the tally excluding DoorDash is seen falling by low single digits. Meanwhile, store closures by Yum Brands (YUM) unit Pizza Hut and Papa John's (PZZA) could be a slight benefit to Domino's in the first quarter, Reich added.
RBC reiterated its sector perform rating on Domino's stock and reduced the price target to $400 from $425.
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