Simon French of Panmure Gordon looks ahead to the preliminary results for Domino’s Pizza on Monday (25 February), saying that he expects to see a growth in earnings per share but warning that the risk to consensus forecasts is on the downside.
French said: “The company issued an overall in-line Q4 IMS, with LFL sales of +5%. UK store openings of 57 were slightly behind the targeted 60. We forecast c13% EPS growth in 2013, partly reflecting narrowing international losses, but think the risk to consensus forecasts is on the downside and yet the group trades on a P/E of 22.49.
“We think a more appropriate multiple is c15x which drives our Target Price of 360p implying c34% potential downside; Sell.”
He added: “LFL sales for the YTD should be fairly robust driven by poor weather and the comparative is +4.7%. Trading in 2012E benefitted from Euro 2012, the London Olympics and the wettest summer for 100 years.
“Without these tailwinds this year we expect LFL sales growth to be subdued at c3%. However this will be partly offset by losses from international operations that should fall by one third to c£2m. We expect the group to provide greater disclosure on the performance of its German stores and future plans for the country.
“2012E was a 53-week year and therefore we see little downside risk to consensus forecasts of £46.2m PBT (21.2p EPS) and our forecast of £46.1m PBT (21.2p EPS). Consensus forecasts for 2013E are for £52.2m PBT (24.0p EPS) and we are bang in-line. On a 52-week basis therefore it appears consensus for 2013E is assuming 15.3% growth in PBT which appears ambitious on the back of just 3% LFL sales growth and despite the narrowing International losses. As such we think the risk to 2013E consensus forecasts is on the downside.”
