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 (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.
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