Starbucks (NASDAQ:SBUX), Dunkin' Brands (NASDAQ:DNKN), and Krispy Kreme Doughnuts (NYSE:KKD) operate three of the largest coffee and quick-serve restaurant chains in the world and all have recently released their quarterly results. Let's break down the reports and decide which company had the best quarter and could provide the highest returns for investors going forward.
The quarterly reports
Starbucks released its first-quarter report for fiscal 2014 on Jan. 23. Here's a breakdown and year-over-year comparison of the results:
|Earnings Per Share||$0.71||$0.69|
|Revenue||$4.24 billion||$4.29 billion|
Starbucks' earnings per share increased 24.6% and revenue increased 11.8% year-over-year, driven by global comparable-store sales rising 5%. Starbucks' operating income increased 29% to $813.5 million and the operating margin expanded an impressive 260 basis points to 19.2%. These results allowed the company to maintain its quarterly dividend of $0.26 and repurchase approximately 600,000 shares during the quarter. Also, 417 new coffee shops opened during the quarter, propelling Starbucks past the milestone of 20,000 total locations to end the period with 20,184 coffee shops.
On Feb. 6, Dunkin' Brands released its fourth-quarter results to complete fiscal 2013. Here's an overview of the report and a year-over-year comparison:
|Earnings Per Share||$0.43||$0.43|
|Revenue||$183.20 million||$183.13 million|
Dunkin' Donuts' earnings per share increased 26.5% and revenue increased 13.3% year-over-year, led by comparable-store sales growing 3.5% at domestic Dunkin' Donuts locations. Operating income increased 11.8% to $89.2 million and the operating margin expanded 110 basis points to an incredible 48.7%. The strong performance allowed Dunkin's board of directors to approve a 21.1% increase in the company's quarterly dividend and authorize a $125 million share repurchase program. Also, 309 new restaurants opened during the quarter, which brought the company's total store count to 18,158 between its two brands.
Krispy Kreme, the last of the three to report, released its fourth-quarter report for fiscal 2014 on March 12. Here's a breakdown of the results and a year-over-year comparison:
|Earnings Per Share||$0.12||$0.13|
|Revenue||$112.75 million||$119.59 million|
Outlooks on the year ahead
In its report, Starbucks reaffirmed its full-year outlook for fiscal 2014. It expects earnings per share in the range of $2.59-$2.67, an increase of 14.6%-18.1% from fiscal 2013, on revenue growth of at least 10%. Here's a breakdown of the expected earnings for the remaining three quarters:
- Second quarter: $0.54-$0.55
- Third quarter: $0.64-$0.66
- Fourth quarter: $0.70-$0.75
Starbucks went on to say that it expects comparable-store sales to grow in the mid-single-digits while it expects its operating margin to expand by about 150-200 basis points. Also, the company reiterated its plan to open at least 1,500 net new locations during the year. If Starbucks can achieve its projections, it would result in three more record-setting quarters and another record-setting year.
Dunkin' Brands provided its guidance for fiscal 2014 in the fourth-quarter report, and it expects the following results:
- Earnings per share of $1.79-$1.83
- Operating income growth of 10%-12%
- 380-410 new Dunkin' Donuts locations in the United States
- 300-400 new international locations between both Dunkin' Donuts and Baskin-Robbins
In Krispy Kreme's earnings report, the company raised its outlook on fiscal 2015 by calling for the following results:
- Earnings per share of $0.73-$0.79
- 30-40 new domestic locations
- 85 new international franchises
And the winner is...
After reviewing the earnings reports and outlooks on the year ahead, Dunkin' Brands wins this three-way matchup. Only this company exceeded revenue expectations and it did this while showing strong growth in its earnings per share and pointing toward significant growth in fiscal 2014. The company also made two of the most shareholder-friendly moves possible by increasing its dividend and authorizing a share repurchase program, which resulted in a stunning quarter overall. I believe Foolish investors should look to pick up positions in Dunkin' Brands immediately and hold on to them for several years. With this said, if you are not sold on Dunkin', both Starbucks and Krispy Kreme are attractive at current levels as well.
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Joseph Solitro owns shares of Dunkin' Brands Group. The Motley Fool recommends Starbucks. The Motley Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.