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Starbucks, Dunkin' Brands, or Krispy Kreme: Which Company Had the Best Quarter?

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.

Source: Fool Flickr

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:

Metric Reported Expected
Earnings Per Share $0.71 $0.69
Revenue $4.24 billion $4.29 billion

Source: Benzinga

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.

Source: Dunkin' Brands

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:

Metric Reported Expected
Earnings Per Share $0.43 $0.43
Revenue $183.20 million $183.13 million

Source: Benzinga

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. 

Source: Krispy Kreme

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:

Metric Reported Expected
Earnings Per Share $0.12 $0.13
Revenue $112.75 million $119.59 million

Source: Benzinga

Krispy Kreme's earnings per share increased 33.3% and revenue increased 3.3% year-over-year, as comparable-store sales rose 1.6% at company-owned stores. Operating income increased 26.7% to $9.07 million and the operating margin expanded 149 basis points to 8.05%. Krispy Kreme's strong performance allowed management to increase its share repurchase authorization to $80 million from $50 million and this will take advantage of the $55.7 million in cash on the company's balance sheet at the end of the quarter. Also, 16 new stores opened during the quarter, which brought Krispy Kreme's total to 812 worldwide.

Source: Starbucks' Facebook

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. 

Source: Dunkin' Brands Blog

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
This earnings per share projection would result in an increase of 17%-20% for the year, very similar to the 19.5% growth we saw from 2012 to 2013. The Dunkin' Donuts brand has been showing immense strength worldwide, so the company clearly set up its expansion plan to take full advantage of this. Overall, if Dunkin' can achieve its expectations, this would result in the best year in the company's history.

Source: Fool Flickr

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
In its third-quarter report, Krispy Kreme had projected earnings per share of $0.71-$0.76 for fiscal 2015, which fell short of analysts' estimates that called for EPS of $0.77; this caused shares of Krispy Kreme to fall more than 25% over the next couple weeks. The new outlook eradicated the cause for concern and it points toward earnings-per-share growth of 17.7%-27.4% from fiscal 2014; this would be very impressive if the company can accomplish it. 

And the winner is...

Source: Dunkin' Brands

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.

It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses, like Dunkin' Brands, Starbucks, and Krispy Kreme, and keep them for the long term. In the special free report "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

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Joseph Solitro

A fan of innovation, strong fundamentals, and all things baseball. Follow on Twitter @JoeySolitro. Fool on!

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