Krispy Kreme Doughnuts (KKD), Starbucks Corporation (SBUX): What This Company’s Guidance Means and Why You Should Get In

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Last month, Krispy Kreme Doughnuts (NYSE:KKD) announced its Q1, 2013 results, beating analyst estimates on revenue and earnings. The company went ahead and revised its initial guidance on earnings. The company had struggled to mount a sustainable rally since March, falling after every rise, but now seems set for a sustained rise.

Krispy Kreme Doughnuts (NYSE:KKD)

Krispy Kreme Doughnuts (NYSE:KKD), together with its subsidiaries, operates as a branded retailer and wholesaler of doughnuts, beverages, and treats and packaged sweets worldwide. It has 97 shops and operates 651 franchises, with only 142 of those based in the U.S., according to data as of Feb. 3, 2013. Regardless of the recent stagnation, the stock is up 52% year to date.

Krispy Kreme Doughnuts (NYSE:KKD) faces competition from industry giants such as Starbucks Corporation (NASDAQ:SBUX) and Dunkin Brands Group Inc (NASDAQ:DNKN), while Einstein Noah Restaurant Group, Inc. (NASDAQ:BAGL) is a relatively smaller rival in terms of market capitalization.

Solid results and solid outlook

Krispy Kreme Doughnuts (NYSE:KKD) is definitely getting back to the basics. The company reported $120.6 million in revenue for the most recent quarter, an 11% increase from last year, and beat analysts’ estimate of $117 million. Profits were up 33.3% from $6 million reported in 2012 to $8 million. However, this included provision for deferred income taxes it had taken last year. Without this, Krispy Kreme Doughnuts (NYSE:KKD)’s net profits were $0.04 above the analyst estimate of $0.16 per share.

Following this performance, the company added a smile to the investors’ faces by revising its initial guidance for earnings in fiscal 2013 from a range of $0.53-to-$0.57 to $0.59-$0.63 per share.

Krispy Kreme Doughnuts (NYSE:KKD) President, CEO, Director, and Chairman James H. Morgan commented, “as stated in our earnings release this afternoon, revenues for the quarter increased over 11% as we experienced top line growth across all 4 segments. Most notably, we delivered our 18th consecutive quarter of increased same-store sales at Company Stores, which rose an astounding 11.4%. This performance, which we believe significantly outpaces the industry, was driven primarily by higher customer counts, with only approximately 3% resulting from pricing.”

Krispy Kreme’s biggest direct competitor, Starbucks Corporation (NASDAQ:SBUX), also reported a solid quarter, as it grew earnings 26%. Dunkin Brands Group Inc (NASDAQ:DNKN), and Einstein Noah, on the other hand, reported declines in earnings for their respective quarters. Starbucks Corporation (NASDAQ:SBUX)’s most recent quarterly revenue grew 11.3%, just about the same rate reported by Krispy Kreme, while Dunkin’ Brands and Einstein Noah Restaurant Group, Inc. (NASDAQ:BAGL)’s revenues grew 6.2% and 1.2%, respectively.

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