Krispy Kreme's (KKD) Earnings Aren't Sweet Enough for Wall Street
Shares of Krispy Kreme (KKD) didn't taste so sweet last week, after the company reported second quarter earnings that beat the consensus estimate on revenue but missed on earnings. The company reported adjusted earnings of $0.14 per share, which came in two cents shorts of analyst estimates. Revenue rose 10% to $112.7 million, topping the consensus estimate of $111.5 million. Same-store sales at the donut chain climbed 10%. Daily Chart
Although shares plunged 12% immediately after the earnings release, CEO James Morgan remained upbeat, calling the second quarter "an outstanding quarter for us, and results exceeded our expectations, despite unusual items that in the aggregate negatively affected our earnings by about $0.01 per adjusted share." Investors, however, were less optimistic, especially since Morgan merely reaffirmed its full year earnings guidance of $0.59 to $0.63 per share, rather than raising it. Morgan emphasized that the company's current projection represents 30% year-on-year growth, although it was clear that Wall Street had expected more. The main concern about Krispy Kreme appeared to be its higher-than-expected operating expenses due to expansion. For investors unfamiliar with the Krispy Kreme story, overzealous expansion and an accounting scandal nearly destroyed the company several years ago. After slimming down and straightening out its financials, the company made an impressive comeback, tripling its share price over the past twelve months. Its expansion has been well-received, while same-store sales have risen at established locations. A major part of Krispy Kreme's expansion is its efforts to saturate Asian markets like South Korea and Taiwan. On July 23, Krispy Kreme announced a new agreement with its franchisee Lotteria Co. to open 60 new Krispy Kreme outlets in South Korea over the next five years. It is also adding 10 locations to Taiwan, after its primary rival, Dunkin' Brands (DNKN
), pulled out of the country earlier this year. Last month, Krispy Kreme also announced that it would buy back $50 million in outstanding shares effective immediately. Krispy Kreme's primary competitors also include coffee giant Starbucks (SBUX
) and fast food chain McDonald's (MCD
), which both offer popular coffee and dessert menus. Although Krispy Kreme has gained significant market share over the past year, it continues to lag industry leaders. According to IBD's list of 197 industries, Krispy Kreme fell from #14 to #47 within two months as market leaders like McDonald's consolidate their operations. Shares of Krispy Kreme currently trade at 31 times forward earnings with a 5-year PEG ratio of 1.45 -- indicating that the stock is still trading at a premium despite expectations for longer-term growth. The stock does not currently pay a dividend. Other News About KKD Krispy Kreme Sinks 12% on Disappointing Profit
Krispy Kreme doesn't taste as sweet anymore. Krispy Kreme Slumps After Profit Misses Estimates
The donut maker posts a big bottom line miss. Other Stocks in the News Is This Health Care Stock Underrated?
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Published on Sep 5, 2013
By Leo Sun