"Hot now" doughnut maker Krispy Kreme Doughnuts (NYSE: KKD) will report third quarter results after hours Monday. Krispy Kreme shares have more than doubled in the past year, but they dropped over 13% in August following a disappointing second quarter report. Will the company bake up a fresher third quarter?    

Krispy Kreme was a market superstar after its  IPO. However, after that the low-carb diet craze and some managerial missteps pressed down share prices. The company's on the way back up thanks to a move toward gourmet coffee products to remain competitive with the likes of Dunkin' Brands Group (NASDAQ:DNKN). Krispy Kreme recently announced its intention to move further into retail sales channels that don't require preparing the doughnuts on site.

Here's what to look for in the third quarter report.  

Source: Jennie Faber

Year-over-year improvements 
The earnings release ultimately measures the current quarter's performance against the same period last year. What numbers does Krispy Kreme need to beat?

Krispy Kreme reported third quarter revenue of $107.1 million, up nearly 9% from the prior year. Same store sales increased 6.8%. Net income was $5 million or $0.07 per share. 

Company stores had revenue of $72.5 million for the period and domestic franchises reported revenue of $2.5 million. International franchise sales were up 12% over the prior year to $6 million. 

Those are the numbers to beat. Analysts estimate Krispy Kreme will report revenue of $115 million in this year's third quarter, which would represent 7% growth.

Check the costs
The second quarter stumble primarily happened because of higher costs. General and administrative costs jumped 19% to nearly $6 million. Krispy Kreme pinned the jump on higher than anticipated health care costs. The company is self-insured for health care costs so variations in the amount and severity of claims in a period can significantly alter G&A expenses.

However, the G&A cost difference between the first six months of this year and last was only 4%, which suggests that costs remain mostly stable so the double-digit increase should prove temporary. 

Taking on Dunkin'
Coffee is a driving force for the doughnut companies -- and fast food chains in general. Dunkin' Brands' third quarter report included 4.2% comparable-store sales growth for domestic Dunkin' Donuts operations. Dunkin' attributed most of that growth to its beverages, which include hot and cold coffee products.

Krispy Kreme is pushing further into the brew business with a new deal to stock its bagged, ground coffee at Sam's Club (part of Wal-Mart) stores in the southeast states.  It's a step but still a far cry from the ubiquity of Dunkin' Brands grounds on store shelves. Dunkin' also has a deal with Green Mountain Coffee to provide k-cups for Keurig machines. 

Dunkin' reported its third quarter results late last month and beat analyst estimates with revenue of $1.86 million. However, the reported EPS of $0.41 was nearly 5% below estimates. 

Foolish final thoughts
The company remains in a transition period as it increases retail spaces and races to catch up with the coffee dominance of Dunkin'. However, Krispy Kreme's second quarter problems shouldn't bleed into the third and share prices will likely continue to grow into next year.