Domino's, Papa John's Deliver Disappointing Earnings: Here's What Happened

Pizza chain stocks were trading lower Thursday morning after Domino's Pizza, Inc. DPZ reported a top-and-bottom line fourth quarter miss, while Papa John's Int'l, Inc. PZZA reported mixed results.

Domino's Earnings Recap: Domino's said it earned $3.46 per share in the fourth quarter on revenue of $1.36 billion versus expectations of $3.89 per share and revenue of $1.39 billion. U.S. same-store sales were up 11.2% in the quarter and were higher by 11.5% for the full year.

International same-store sales growth was 7.3% in the quarter and was higher by 4.4% for the full year.

Net income rose from $129.3 million a year ago to $151.9 million and improved from $400.7 million in 2019 to $491.3 million in 2020.

Management guided for global retail sales growth (excluding fx) to be 6% to 10% over the next two to three years. The company also expects global net unit growth of 6% to 8% over the same time period.

Shares of Domino's were trading lower by more than 7% Thursday morning at $337.36.

Cowen On Domino's: Domino's U.S. comps were short of expectations of 14% and this contributed to the EPS miss, Cowen analyst Andrew Charles said in a note. The math behind U.S. comps implies 560 basis points of deceleration on a two-year basis.

Management's pre-COVID pandemic guidance called for global net unit growth of 6% to 8% and global retail sales of 7% to 10%. As such, the revised outlook and the 1% lowering of the low-end of the retail sales growth imply U.S. comps of 1% to 5% and flat international comps at 4%.

Cowen maintains an Outperform rating on Domino's stock with an unchanged $450 price target.

Papa John's Quarter Recap: Papa John's said it earned 40 cents per share in the fourth quarter on revenue of $469.8 million versus expectations of 46 cents per share and revenue of $465.72 million. Comparable sales were up 13.5% in North America and up 21.4% internationally.

Net income improved from a loss of $2.142 million a year ago to positive $13.167 million. Net income expanded from $4.866 million for the full year 2019 to $57.932 million in 2020.

Management cited the "on-going uncertainty" amid the COVID-19 pandemic in its decision not to provide a 2021 outlook at this time.

Shares of Papa John's were trading lower by more than 9% Thursday morning at $93.39.

Related Link: Domino's CEO On Pizza Chain's Steady Demand Tailwind

Stephens On Papa John's: Papa John's North American comp growth of 13.5% implies a deceleration from 18% in the prior quarter, but still beat the Street's estimate of 13.4%, Stephens analyst James Rutherford wrote in a note. The research firm was expecting comps to accelerate to 19.1% after checks in the South showed stores were "running nicely higher than mid-teens."

"Despite the NA comp coming in-line with Street and below our number for the quarter, we still expect Epic Stuffed Crust has driven a YTD acceleration, and we hope to get color on this during the call," the analyst wrote.

Stephens maintains an Overweight rating on Papa John's stock with an unchanged $110 price target.

(Photo: Domino's Pizza)