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KKD Hits 52-Week High on Solid 1Q

Zacks Equity Research

Shares of Krispy Kreme Doughnuts Inc. (KKD) touched a new 52-week high of $17.79 during the trading session on May 31 and eventually closed at $17.32. The closing price of this doughnut maker skyrocketed just after the release of its financial results for the first quarter of fiscal 2014.

The adjusted closing price of this restaurant company on May 31, 2013, represented a staggering one-year return of about 191.0%. Average volume of shares traded over the last three months stands at approximately 1,457K.

We believe, despite hitting its 52-week high, this Zacks Rank #2 (Buy) stock has plenty of upside left, given its raised fiscal outlook and expected long-term earnings growth of 25%.

Growth Drivers

Impressive first-quarter 2014 results – including an earnings surprise of 25.0%, sales surprise of 3.4%, a solid 42.9% jump in adjusted earnings per share and 11.2% year over year increase in revenues were the key growth drivers. In addition, management revised the company’s earnings outlook upward.

On May 30, Krispy Kreme reported first-quarter 2014 adjusted earnings per share of 20 cents, beating the Zacks Consensus Estimate by 4 cents and year-ago level by 6 cents. Earnings benefited from margin expansion. Total revenues grew 11.2% on the back of substantial increases at company-store, and domestic and international franchise revenues. Higher traffic leading to 11.4% same-store sales increase provided the company a shot in the arm.

The strong first-quarter results and management’s increasing faith in the company’s prospects led it to raise fiscal 2014 earnings per share guidance from the range of 53—57 cents to the range of 59—63 cents. This revised range implies a year-over-year increase of around 26%–34%.

Moreover, Krispy Kreme has now delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 38.33%.

Other Stocks to Consider

Others players in the same industry, which look attractive at the current levels include The AFC Enterprises Inc. (AFCE), Brinker International Inc. (EAT) and Burger King Worldwide Inc. (BKW) all carrying a Zacks Rank #2 (Buy).

Read the Full Research Report on KKD

Read the Full Research Report on EAT

Read the Full Research Report on AFCE

Read the Full Research Report on BKW

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