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
) 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
), Starbucks (SBUX
) and McDonald's (MCD
). 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
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Published on Feb 1, 2013
By Leo Sun