Why Dunkin' Brands Shares Temporarily Popped

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 Dunkin' Brands (NASDAQ: DNKN  ) , parent of Dunkin' Donuts and Baskin-Robbins, temporarily spiked as much as 12% following its fourth-quarter earnings report. Shares have since given up most of their gains, rising only 2% as of this writing.

So what: For the quarter, Dunkin' Donuts, which accounts for the majority of the company's sales and profits, saw a 3.2% rise in same-store sales. That didn't stop Dunkin' from reporting a 4% decline in overall revenue to $161.7 million as profit nearly tripled to $0.34 from the year-ago period. Wall Street had been looking for a higher revenue figure ($170.9 million), but Dunkin' managed to surpass EPS estimates by $0.01. Furthermore, the company issued full-year EPS guidance of $1.48 to $1.51 versus the $1.51 consensus estimate, and announced a 27% hike in its quarterly dividend to $0.19 from $0.15.

Now what: The key takeaway here isn't Dunkin's revenue miss or relatively in-line 2013 EPS forecast, but the better-than-expected rise in Dunkin' Donuts' same-store sales. Dunkin's signature coffee and lucrative K-Cup partnership with Green Mountain Coffee Roasters is increasing its brand awareness, expanding its offerings, and creating a loyal base of recurring customers. The two main drivers in the restaurant industry at the moment are signature coffee blends and healthier food options -- two areas Dunkin' has been working with a lot of success. In short, Dunkin' Brands may very well head even higher.

Craving more input? Start by adding Dunkin' Brands to your free and personalized Watchlist so you can keep up on the latest news with the company.

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