Is Dunkin' Donuts Playing Catch-Up With K-Cups?

In a report published Monday, Credit Suisse analyst Jason West explored Dunkin' Brands Group Inc DNKN's announcement to significantly expand the distribution of its K-Cups.

Dunkin' Brands Group, the parent company of the coffee and donuts chain Dunkin' Donuts, will see a modest benefit to earnings power through its expanded distribution, according to West. The analyst added that any positive earnings per share momentum will be "well-received" at its current discounted valuation.

According to West, Dunkin' Brands K-Cup sales are estimated to reach approximately $300 million at retail locations (versus zero today) in 2017, translating to a net benefit of $0.06 in earnings per share. The analyst noted that the earnings per share boost is the equivalent of a 2 percent incremental same-store sales growth.

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West concluded that Dunkin' Brands is a top-pick in the restaurant sector given its 8,000 stores in the U.S. with less than 300 of these west of the Mississippi. As such, the company offers the "most compelling" domestic growth stories in the industry.

Shares remain Outperform rated with an unchanged $56 price target.