A Domino's Pizza food delivery courier drives a moped away from a Domino's Pizza store in Hanwell, London.
Jason Alden| Bloomberg | Getty Images
Domino's Pizza on Thursday reported quarterly earnings and revenue that topped analysts' expectations after strong U.S. sales, despite increased competition.
Shares of the company soared 17% in premarket trading.
Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
Earnings per share: $3.13, adjusted, vs. $2.98 expected
Revenue: $1.15 billion vs. $1.13 billion expected
The pizza chain reported fiscal fourth-quarter net income of $129.3 million, or $3.12 per share, up from $111.6 million, or $2.62 per share, a year earlier. Higher royalty revenue from franchisees and lower general and administrative expenses drove the increase in net income.
Excluding items, Domino's earned $3.13 per share, topping the $2.98 per share expected by analysts surveyed by Refinitiv.
Net salesrose 6.3% to $1.15 billion, beating expectations of $1.13 billion.
Domino's reported U.S. same-store sales growth of 3.4%, topping Wall Street's estimates of 2.3%. The chain has been facing greater competition from the likes of UberEats and DoorDash, putting pressure on Domino's U.S. delivery sales.
In response to the trend, the pizza chain has been trying to grow its carryout sales and cut delivery times by strategically adding more U.S. locations. Domino's added 141 net new U.S. restaurants in the fourth quarter.
"Our relentless focus on our customers, our franchisees and the long-term growth and profitability of the Domino's business model helped us deliver a solid 2019 in the face of unique competitive headwinds," CEO Ritch Allison said in a statement.
International same-store sales increased by 1.7% in the quarter.
The pizza chain also reaffirmed its two-to-three year outlook. Domino's expects U.S. same-store sales growth in a range of 2% to 5% and global retail sales growth of 7% to 10%.
Stocks keep reaching record highs. Goldman Sachs is worried that leaves investors vulnerable to surprises.
The investment bank told clients this week that a near-term correction, in which the market slides at least 10% from a recent peak, "is looking much more probable."
The thinking: Equity markets look "increasingly exposed" to disappointing earnings growth due to the new coronavirus outbreak, Goldman warns.
Remember: The number of companies that have lowered their guidance on profits for the first quarter is still in line with past years. But Apple's surprise update this week that it wouldn't hit its revenue target has put investors on edge.
Goldman Sachs notes that the global economy is expected to keep growing, and the United States is, too, despite the country already having experienced its longest economic expansion in 150 years. That creates a supportive environment for stocks. But the bank is concerned that earnings expectations could still be too rosy, especially given the exposure of global companies to the Chinese economy.
Apple(AAPL), it observes, has been "an important driver" of better-than-expected earnings results. Big Tech companies — Facebook, Amazon, Apple, Microsoft and Google — beat earnings expectations by 20% on average last quarter, compared with 4% for the average S&P 500 company.
"Any weakness to these and other companies would likely push earnings estimates lower," wrote Peter Oppenheimer, the firm's chief global equity strategist.
Additionally, depressed bond yields have made stocks look more attractive by comparison. Oppenheimer points to Germany's DAX, which has also hit an all-time high as the yield on the country's benchmark 10-year bond remains in negative territory. That raises the stakes for corporate earnings as well, he argues.
Victoria's Secret is going private at $1.1 billion valuation
L Brands is closing in on a deal to sell control of Victoria's Secret to a private equity firm, the Wall Street Journal reports.
Sycamore Partners is expected to buy 55% of the brand and take the struggling business private. The deal, which could be announced as soon as Thursday, values Victoria's Secret at about $1.1 billion. L Brands, which would be reduced to running Bath & Body Works, is set to control 45% of the separate company.
Leadership shakeup: The Journal reports that Leslie Wexner, the billionaire who built L Brands into a retail behemoth, will step down as CEO and chairman, but is expected to remain on the board and keep stakes in both companies. Wexner has come under heavy scrutiny for his close ties to Jeffrey Epstein, who died in prison last summer while awaiting trial on sex trafficking charges.
Under pressure: Victoria's Secret has struggled with falling sales and competition from upstart lingerie brands. The company said in November that it was canceling its annual fashion show amid growing claims that it was out of touch. Last year, an activist investor built up a stake in the company and pushed for it to spin-off the more successful Bath & Body Works.
Shares of L Brands(LB) fell more than 10% in premarket trading. The valuation is a knock for a company that runs hundreds of Victoria's Secret and PINK brand stores globally, per its last annual report. They brought in more than $7 billion in sales in 2018.
Gold prices hit a nearly 7-year high
Stock records and the highest price for gold in nearly seven years? You read that correctly.
Even as market bulls drove the S&P 500 and Nasdaq to fresh records on Wednesday, gold prices passed $1,610 per ounce. The spike indicates that the spread of the novel coronavirus is encouraging investors to pile into safe haven assets, even as many decide to keep making riskier bets.
UBS analysts Wayne Gordon and Giovanni Staunovo think that gold could hit $1,650 per ounce or higher in the coming weeks. Their argument: First quarter data will "look ugly before it gets better."
"With US equity valuations elevated, any further upsets could see another bout of volatility, a further rally in government bonds and a higher gold price," they said in a recent note to clients.
Domino's Pizza(DMPZF) and ViacomCBS(VIACA) report results before US markets open. Dropbox(DBX) and Zscaler(ZS) follow after the close.
Also today:
The US Energy Information Administration releases weekly crude oil inventories at 11 a.m. ET.
The European Central Bank also releases minutes from its January meeting.
Coming tomorrow: US existing home sales for January.
The all-stock takeover, set to be announced Thursday, will combine a Wall Street firm in the late innings of a decadelong turnaround with a discount broker built on the backs of dot-com day traders. It is the biggest takeover by a giant U.S. bank since the 2008 crisis.
E*Trade
ETFC 2.60%
brings five million retail customers, their $360 billion in assets and an online bank with cheap deposits that Morgan Stanley can funnel into loans. Its CEO,
Michael Pizzi,
is coming along to run the e-brokerage business, which will keep its brand, its handful of retail storefronts and its buzzy and well-funded ad campaigns, Morgan Stanley Chief Executive
James Gorman
said.
Photo:
Simon Dawson/Bloomberg News
“
‘We’ll take on Schwab. We’ll take on Fidelity.’
”
Morgan Stanley already has 15,500 human advisers catering to millionaires and last year rolled out an online-only tool for customers with less money and less-complicated financial lives. E*Trade will slot into that wealth-management arm, which will have more than eight million users and $3.1 trillion in client money once the deal closes.
“We’ll take on Schwab. We’ll take on Fidelity,” Mr. Gorman, now in his 10th year as CEO, said in an interview. “This isn’t about legacy-building; it’s about getting [Morgan Stanley] ready for prime time.”
E*Trade became a household name in the late 1990s with its dot-com vibe and splashy Super Bowl commercials. Falling commissions have hurt its brokerage arm and low interest rates have cut into the money it makes by investing the idle cash its customers leave in their accounts.
Its crown jewel is a comparatively low-profile business: managing the stock that employees at hundreds of companies receive as part of their pay. Those shares are typically locked up for a few years and when they become available, E*Trade aims to move those employees into brokerage accounts.
Morgan Stanley has a competing business, which it expanded a year ago by acquiring Solium, a privately held specialist in the space. After buying E*Trade, Morgan Stanley would have more than 4,000 corporate customers and $580 billion of stock held on behalf of their employees who might, it hopes, one day be rich.
The takeover, code-named Project Eagle, is the largest deal by a major Wall Street player since the crisis, when regulators arranged hasty marriages in a bid to shore up the financial system. Few have been willing to test the waters in Washington since then.
That the test balloon comes from Morgan Stanley, the banking industry’s weakling during the 2008 crisis and a problem child for years afterward, is a testament to its reinvention under Mr. Gorman. The 61-year-old has cut riskier trading operations and grown steadier businesses like lending and wealth management. Revenue hit a record $41 billion last year.
“We’re strong now, and I believe you move from a position of strength,” Mr. Gorman said.
He has sounded more acquisitive in recent months and floated a trial balloon with regulators and investors by buying Solium last year for $900 million. Morgan Stanley shares have gained 40% since September, giving him a more richly valued currency to shop with.
Mr. Gorman said he has been eyeing E*Trade since 2002, when he was an executive at Merrill Lynch. He reached out again in 2007, when he was tasked with fixing Morgan Stanley’s brokerage arm, but negotiations wavered as E*Trade started to feel tremors of the coming meltdown in its portfolio of home-equity loans.
Talks this time around began in late December, when a two-hour conversation between Messrs. Gorman and Pizzi convinced both men of the deal’s merits. Mr. Gorman said the tumult kicked off by Schwab made E*Trade “more open” to a deal but said he wasn’t low-balling: The deal price of $58.74 a share, all in Morgan Stanley stock, is 34% higher than E*Trade’s price before Schwab announced its fee cut.
Morgan Stanley expects to recoup that premium through $400 million of cost cuts and additional savings of $150 million from using E*Trade’s low-cost deposits to replace more expensive funding. Mr. Gorman said he also sees an opportunity to take E*Trade international, where his firm has no wealth-management presence.
All of Wall Street is on the hunt for more reliable sources of revenue after postcrisis regulations and a long period of eerie calm in the markets crimped trading.
JPMorgan Chase
& Co. and
Bank of America Corp.
are getting bigger in payments, while Morgan Stanley’s closest peer and fierce rival,
Goldman Sachs
Group Inc., is building an online retail bank.
Mr. Gorman is proving himself to be one of the savvier corporate deal makers. He pried wealth manager Smith Barney away for a song from a weakened
Citigroup
Inc. in the wake of the crisis. Here he seized on the brokerage price war to nab E*Trade.
Morgan Stanley has also been scouring takeover targets in asset management, where it is smaller and nichier than peers, people familiar with the matter have said.
The E*Trade acquisition is expected to close in the fourth quarter.
UBS(UBS), the world's largest wealth manager, has announced that Sergio Ermotti is stepping down as CEO. He'll be replaced by Ralph Hamers, the current chief executive of Dutch bank ING(ING).
Axel Weber, the chairman at UBS, said in a statement that Hamers "is the right CEO to lead our business into its next chapter." Hamers will take up the post on November 1.
Both of Switzerland's top banks have announced a change in leadership this month.
Credit Suisse(CS) CEO Tidjane Thiam resigned earlier this month after acknowledging that two spying scandals last year had "disturbed" the firm. He's been replaced by company veteran Thomas Gottstein.
Change at UBS
Ermotti became chief executive of UBS in 2011 in the aftermath of a rogue trader scandal that cost it $2 billion.
He oversaw efforts to beef up the bank's wealth management business amid continued weakness at its investment banking division. Asia has been a particular focus.
In 2018, UBS became the first foreign bank to be allowed to take control of its business in China. It received approval from regulators to increase its stake in a joint venture there to 51%.
Danish shipping giant A.P. Moeller-Maersk AS said Friday that it made weaker-than-expected fourth-quarter earnings and warned that it expects a weak start to the year with limited visibility for the rest of 2020 amid the coronavirus outbreak.
Maersk
MAERSK.A, +1.19%MAERSK.B, +1.00%
swung to an unexpected net loss in the quarter of $72 million from a profit of $46 million in the year-earlier period. A FactSet analyst poll had expected a net profit of $343 million. It said that its financials are materially impacted by implementing the IFRS 16 accounting standard and 2019 figures aren’t comparable with last year.
Maersk, which is considered a barometer of global trade, saw revenue fall 5.6% to $9.67 billion, missing expectations of $9.94 billion, as its shipping unit lowered capacity to adjust to market conditions.
Earnings before interest, tax, depreciation and amortisation for the quarter came in at $1.46 billion against expectations for $1.53 billion. For the full-year, Ebitda rose to $5.71 billion, meeting the company’s own guidance of between $5.4 billion and $5.8 billion.
The company’s main shipping unit saw revenue fall as volumes dropped 1.8% while freight rates slipped 0.4%. Maersk said it continued to cut its cost base at the unit while lower fuel prices also helped offset some of the weakness.
Volumes were hit in both East-West and North-South routes, amid continued slower growth in the U.S. and front loading of orders in the same quarter last year ahead of anticipated tariffs, lower demand in Europe, continued weak demand in Latin America, and weakened market conditions in West and Central Asia and Oceania.
Maersk said the outlook and guidance for 2020 is subject to significant uncertainties and impacted by the current outbreak of the Coronavirus (COVID-19) in China, which has significantly lowered visibility on what to expect in 2020.
“As factories in China are closed for longer than usual in connection with the Chinese New Year and as a result of the COVID-19, we expect a weak start to the year,” the company said.
The organic volume growth in its main ocean unit is expected to be in line with or slightly lower than the estimated 2020 average market growth of 1% to 3%.
Accumulated gross capex for 2020-2021 is still expected to be $3.0 billion-$4.0 billion.
Maersk declared an unchanged full-year dividend of DKK150.
