Why Krispy Kreme Shares Popped

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Krispy Kreme Doughnuts (NYSE: KKD ) were coming hot out of the fryer this morning, rising as much as 26% on a strong earnings report.

So what: The once-beleaguered stock posted adjusted earnings per share of $0.12, above estimates of $0.08, and delivered a same-store-sales jump of 6.8%, the 16th quarter in a row with positive comps. Operating income at company-owned stores was dramatically improved, going from a loss of $574 million to a net of $2 million. Perhaps more reassuring to investors was the increase in full-year EPS guidance to $0.44-$0.47 and $0.49-$0.55 for the next fiscal year.

Now what: After its stock collapsed several years ago, the doughnut vendor has quietly reinvented itself by franchising abroad. International stores now deliver more than half of the company's operating income, and the company is quickly expanding overseas with 75 more stores expected next year. The 26% jump today may be a little overeager and the valuation seems priecy for a recovering brand, but shareholders can take in comfort in knowing the company is at least moving in the right direction.

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