Key Highlights: Dunkin' Brands Q4 2013 Earnings Report (Part 1 of 5)
Dunkin’ Brands Group, Inc. is a quick-service restaurant chain with core franchise located in the New England region of the U.S. While the company’s franchise-focused business model closely resembles that of other domestic quick service restaurant chains such as McDonalds (MCD), it operates in an industry of coffee retailers such as Starbucks (SBUX) and Krispy Kreme Donuts (KKD).
Dunkin’ Brands releases its earnings relatively later than other coffee and quick-service restaurant industry players. For this reason, it is imperative for an investor to not only read the earnings call transcript for one particular company they wish to invest in, but many in the industry. This allows the investor to have a preliminary understanding of industry market conditions and assess how economic drivers will affect the company before they release earnings. Likewise, many factors affecting the various companies also affect the PowerShares Dynamic Food & Beverage ETF (PBJ). A company that misses earnings or revenue estimates will likely see a short-term fall in stock prices.
Q4 earnings are up
Fourth-quarter earnings for fiscal year 2013 were released on February 6 at 8:00 AM EST. Dunkin’ Brands posted 0.43 diluted, adjusted earnings per share. This beat analysts’ average expectation of 0.40 EPS by 7.0%.
Main factor contributing to earnings growth
This favorable .02 EPS increase (4.9%) over the third-quarter earnings is attributable to the ever tightening operating costs as well as an increase in sales. Dunkin’ Brands executives believe the increase in sales was the result of their efforts to improve the customer’s experience, particularly in the U.S. Dunkin Donuts franchises. Dunkin’ Donuts U.S. ended the 2013 calendar year with an average of five guest satisfaction points over the 2012 average. This begs the question: What steps did Dunkin’ Brands take to improve their customers’ experience?
For more information, see Must-know: Which of Dunkin’s segments have upside potential?
Browse this series on Market Realist:
- Part 2 - Coffee industry: A brief overview
- Part 3 - Q4 discussion: What went well for Dunkin’ Brands
- Part 4 - Must know: How coffee price affected Dunkin’ Brands
- Consumer Discretionary
- Krispy Kreme Donuts