Dunkin' Brands (DNKN) Rallies on Strong 4Q Earnings

Shares of Dunkin' Brands (DNKN: Charts, News), the parent company of Dunkin' Donuts and Baskin Robbins Ice Cream, rallied on Thursday despite posting a decline in revenue that missed Wall Street estimates. For its fourth quarter, Dunkin' Brands reported revenue of $161.7 million, down 4% from the prior year quarter and below the average analyst forecast of $170.9 million.

However, net income more than tripled from $11.6 million to $34.3 million, beating analysts' forecasts. For the full year, Dunkin' earned $108.3 billion - a a 231.9% increase over the previous year. Daily Chart
Dunkin' Brands attributed its fourth quarter revenue decline to one less week in the quarter, as well as a manufacturing shift to Dean Foods (DF: Charts, News) which hurt sales of ice cream products. For the full year, revenue at Dunkin' Brands actually rose 6.1% to $658.2 billion. U.S. same-store sales at Dunkin' climbed 3.2%, topping the analyst consensus of 2.4%. Despite having expanded abroad, the U.S. market still accounts for nearly 75% of Dunkin's revenue and 80% of its profit. CEO Nigel Travis was upbeat regarding the company's domestic strength, stating, "Despite macro-economic instability and a tough competitive environment, consumer and franchisee demand for Dunkin' Donuts is high." Travis noted that Dunkin' was not experiencing any negative impact from the recent payroll tax increase which reduced discretionary spending. Dunkin' Brands added 665 new restaurants in fiscal 2012, including 291 new Dunkin' Donuts locations in the United States. The company intends to revise its full-year forecast after it determines savings from refinancing debt. It also plans to refinance its senior secured credit facilities to take advantage of favorable credit market conditions. Dunkin' Brands primarily competes with Krispy Kreme (KKD: Charts, News), Starbucks (SBUX: Charts, News) and McDonald's (MCD: Charts, News). Krispy Kreme staged a remarkable turnaround over the past five years, and its stock has risen nearly 400%. Meanwhile, McDonald's continues waging war against Starbucks and Dunkin' Donuts with its constantly changing McCafe coffee and dessert menu. From a macro perspective, lower costs for coffee will likely offset the rising cost of wheat in the coming year. This shift should balance out for donut and coffee shops, which offer both wheat-based and coffee-based products. Dunkin' Donuts trades at 24.2 times forward earnings with a PEG ratio of 1.7, meaning that while growth could be right around the corner, the stock might be getting ahead of itself. It has a price to sales ratio of 5.6 with a high debt to equity ratio of 578.49. Those metrics mean that Dunkin' is growing slower than anticipated, but is shouldering high debt. On the bright side, Dunkin's board of directors approved a dividend increase of 27% to 19 cents per share. Although Dunkin' Donuts might appear to be a safe investment at first, its fundamentals are weaker and more overvalued than the rest of the quick-serve restaurants industry. However, the stock has a well-established history of growth, rising 32% over the past twelve months. Other News About DNKN Dunkin' Donuts Sees Sales Gain in U.S. Dunkin' Donuts posts revenue growth in the U.S. Dunkin' BrandsprofitbeatsStreet; U.S. salesholdup Dunkin' rallies after beating Wall Street expectations. Other Stocks in the News Apple Nabs 70% Of Global Smartphone Profit, Samsung 25% Is Apple making a comeback? The Coca-Cola Company and Resilience After all these years, how has Coca-Cola stayed on top? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Feb 1, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2020. Content published with author's permission.

Posted in ...