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Domino's Quarterly Results Likely Impacted by Macro Pressures, Promotions, UBS Says

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Domino's Quarterly Results Likely Impacted by Macro Pressures, Promotions, UBS Says

Domino's Pizza (DPZ) is expected to post soft second-quarter results due to economic headwinds and increased promotional activity across the pizza category, UBS Securities said in a note emailed Wednesday.

The brokerage expects Domino's US same-store sales to fall 1.5% in the second quarter, compared with consensus expectations that UBS put at 0.3% growth. UBS forecasts the pizza restaurant operator's earnings per share at $3.91, lower than Wall Street's expectation of $4.23.

Soft consumer spending and heightened promotional competition will likely offset the impact of sales initiatives, including those focused on value, and third-party contributions, UBS analyst Dennis Geiger said.

Crude and gasoline prices soared in the aftermath of the Iran war, souring consumer sentiment. Energy prices have come down as the US and Iran engaged in talks and agreed to a memorandum of understanding to end their war in June.

Earlier this year, Domino's Pizza reported weaker-than-expected first-quarter results as consumer uncertainty and inflation weighed on demand late in the quarter. It is scheduled to report second-quarter financials July 20.

The company said last month Chief Operating Officer Joe Jordan will succeed Russell Weiner as chief executive later this year.

UBS projects a 0.2% increase in US comparable sales for the full year.

"While near-term headwinds are likely to persist and comparisons are getting tougher into (the second half), we anticipate sequential recovery over the longer-term," Geiger added.

Promotional offerings and expansion of its DoorDash (DASH) partnership will help drive a long-term recovery, UBS said.

The company's valuation offers an attractive risk-reward profile backed by expected market share gains despite economic uncertainty, according to the note.

UBS reiterated its buy rating on Domino's stock and kept the price target unchanged at $375.

Domino's shares closed 3.4% lower on Wednesday. The stock has lost 27% so far this year.

Price: $303.15, Change: $-10.00, Percent Change: -3.19%

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