Market Overview

Coffee and Doughnuts on a Run

While the broader markets panicked late Friday, Krispy Kreme Doughnuts (NYSE: KKD) shares soared on the day after the company reported exceptional first-quarter earnings and raised its guidance.

The company said per-share earnings rose 43 percent year-over-year to $0.20, while revenue gained 11 percent to $120.6 million. Both numbers topped consensus estimates. Krispy Kreme also raised its full-year forecast to earnings of $0.59 to $0.63 per share, from earlier guidance of $0.53 to $0.57.

Krispy Kreme ended the day nearly 21.5 percent higher, while rivals Dunkin' Brands (NASDAQ: DNKN) and Starbucks (NASDAQ: SBUX) were down fractionally. The S&P 500 and the Dow both ended Friday more than one percent lower.

Here is a quick look at how Krispy Kreme, Dunkin' Brands and Starbucks have fared and what is expected of them.

Krispy Kreme Doughnuts

This Winston-Salem-based retailer and wholesaler of doughnuts, beverages and other packaged treats sports a market capitalization of a little more than $1 billion. Its long-term earnings per share (EPS) growth forecast is about 25 percent. The price-to-earnings (P/E) ratio is higher than the industry average, though, but so is the operating margin.

The short interest in Krispy Kreme was about five percent of the float as of the May 15 settlement date. That was the lowest number of shares sold short so far this year. The days to cover declined in the most recent period from almost three to less than two.

Five of the eight analysts that follow the stock and were polled by Thomson/First Call recommend buying shares, with two of them rating the stock at Strong Buy. The mean price target, or where the analysts expect the share price to go, is still more than four percent higher than the current share price, even after the spike on Friday. That mean price target is a level the shares have not seen since 2004.

The share price jumped more than 21 percent on Friday to a new multiyear high. It is up more than 77 percent year-to-date. Over the past six months, the stock has outperformed Dunkin' Brands and Starbucks, as well as the likes of Nathan's Famous (NASDAQ: NATH) and Red Robin Gourmet Burgers (NASDAQ: RRGB), which are also on a roll.

Dunkin' Brands

This operator and franchiser of quick-service restaurants under the Dunkin' Donuts and Baskin-Robbins brands has a market cap of more than $4 billion. The dividend yield is about 1.9 percent. The long-term EPS growth forecast is more than 15 percent. The operating margin is higher than the industry average and the return on equity is more than 19 percent.

The short interest in this Boston area-based company was more than four percent of the total float at mid-May. That was the lowest number of shares sold short since last June, on the second lowest average daily volume. The days to cover remains at less than five.

Of the 21 analysts surveyed, 11 recommend buying shares, with eight of them rating the stock at Strong Buy. And the analysts think shares have some headroom, as their mean price target is about seven percent higher than the current share price. But note that the consensus target is less than the recent 52-week high.

The share price has pulled back about six percent from a post-IPO high about two weeks ago, but it is still more than 18 percent higher year-to-date. Over the past six months, the stock has outperformed Starbucks and McDonald's (NYSE: MCD), as well as the broader markets.

Starbucks

This global retailer of specialty coffees and other products is headquartered in Seattle and has a market cap of more than $47 billion. Its dividend yield is about 1.3 percent. The long-term EPS growth forecast is more than 18 percent. Starbucks' operating margin is greater than the industry average, but its forward earnings multiple is higher than the industry average P/E ratio.

The number of Starbucks shares sold short as of the most recent settlement date represented a bit more than one percent of the total float. The average daily volume was the lowest it has been in the past year, but the days to cover rose to more than two, the highest it has been so far this year.

Of the 30 analysts polled, 11 rate shares at Strong Buy, and 12 others also recommend buying shares. None of them recommend selling shares. Their mean price target indicates that the analysts on average see more than six percent upside potential. That target would be a multiyear high.

The share price has pulled back a bit from a recent multiyear high, but shares are trading almost 15 percent higher than at the beginning of the year. While the stock has underperformed Krispy Kreme and Dunkin' Brands over the past six months, it has outperformed McDonald's and the broader markets.

Posted-In: Dunkin' Brands Krispy Kreme Doughnuts McDonald's Nathan's FamousEarnings Long Ideas Short Ideas Trading Ideas Best of Benzinga

 

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