Why Krispy Kreme Doughnuts (KKD) Is Gaining Today

NEW YORK (TheStreet) -- Krispy Kreme Doughnuts (KKD) was gaining 8.6% to $21.59 in after-hours trading Wednesday after raising its fiscal 2015 outlook and despite missing analysts' estimates for earnings and revenue.

For its fiscal fourth quarter the doughnut maker posted earnings of 12 cents a share, missing analysts' estimates of 13 cents a share by one cent. Revenue dropped 4.6% to $112.7 million. Analysts surveyed by Thomson Reuters expected earnings of $119.6 million.

Same store sale rose 6.7% in fiscal 2014. That's the fifth consecutive year of increasing same store sales according to CEO James H. Morgan, that's even through the severe winter storm near the end of the fiscal year that ended on February 2, 2014.

Looking forward to fiscal 2015 the company expects earnings to increase by about 20% to 30% for the year.

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TheStreet Ratings team rates KRISPY KREME DOUGHNUTS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate KRISPY KREME DOUGHNUTS INC (KKD) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 5.4%. Since the same quarter one year prior, revenues slightly increased by 6.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • KKD's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • Powered by its strong earnings growth of 28.57% and other important driving factors, this stock has surged by 28.83% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, KKD should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Hotels, Restaurants & Leisure industry average. The net income increased by 34.4% when compared to the same quarter one year prior, rising from $5.04 million to $6.78 million.
  • You can view the full analysis from the report here: KKD Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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