Krispy Kreme Doughnuts Inc.
) hit its 52-week high on November 20 after reporting outstanding
fiscal third-quarter results, which included a raised outlook for
the full year. Moreover, with rising earnings estimates, a
one-month return of roughly 31% and a long-term earnings growth
projection of 25.0%, this Zacks #1 Rank (Buy) appears to be a solid
A Winning Third Quarter
On November 19, Krispy Kreme reported fiscal third-quarter earnings
of 12 cents per share, beating the Zacks Consensus Estimate by
50.0% and last year's performance by 71.0%. Total revenue climbed
8.5% year over year to $107.1 million.
Same-store sales at company stores increased 6.8%, marking the 16th
consecutive quarter of comps growth. Operating income in the
quarter expanded 66.0% to $9.2 million.
Based on the strong third-quarter results, Krispy Kreme raised its
outlook for fiscal 2013. Consolidated operating income is now
projected between $34 million and $36 million, up from the previous
range of $29 million to $33 million.
The company also raised its fiscal 2013 earnings guidance to
between 44 cents and 47 cents per share, compared to the previous
range of 36 cents to 42 cents. The company issued a preliminary
guidance for fiscal 2014, which projects operating income of $38
million to $42 million and adjusted EPS for fiscal 2014 between 49
cents and 55 cents per share.
Earnings Estimates Inching Higher
Over the past 30 days, the Zacks Consensus Estimate for fiscal 2013
has advanced 7.1% to 45 cents, as 4 of 5 earnings estimates moved
higher. This reflects year-over-year growth of 45.81%.
Though Krispy Kreme is expensive by most valuation metrics, it
looks reasonable on a P/B and PEG basis. The stock currently trades
at a forward P/B of 2.43x, a 16.2% discount to the peer group
average of 2.90x. Given the long-term growth projection of 25%, the
PEG ratio comes in at 0.8, a 20% discount to the benchmark of 1 for
a value stock. Thus, the expected long-term earnings growth is
currently set at a discount. Based on the double-digit earnings
growth prospect in the current year, the valuation presents a
window of opportunity for investors seeking growth.
Shares surged following its third-quarter earnings release. Since
then, it has been continuously outperforming its 200-day and 50-day
moving averages. Year-to-date, shares of Krispy Kreme have gained
38.0%, outperforming the S&P's 11.0% during the same period of
time. Krispy Kreme's volume is also fairly strong, averaging
roughly 812K daily.
Krispy Kreme is a leading branded specialty retailer of premium
quality doughnuts. As of Oct 28, 2012, the company operated 96
company stores and 635 franchise stores. Furthermore, the company
plans to operate 900 international stores by the end of fiscal
2017. With a market capital of about $589 million, KKD competes
with Dunkin' Brands Group Inc. (
), among others.
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