Why I’ve Made It a Rule to Have These Stocks on My Watch List

Lots of companies are reporting their earnings results at this time, and there is some resilience to the numbers. 

A hard winter definitely is apparent in corporate earnings and economic data. Spring can’t come soon enough.

Krispy Kreme Doughnuts, Inc. (KKD) has been fighting to bring its business back from the edge, and it has been relatively successful. The company’s latest earnings results actually came in just below consensus, but its forecast for fiscal 2015 adjusted earnings was three cents above the current average forecast.

Combined with an increase to its share repurchase program, Krispy Kreme’s stock spiked nicely higher. Same-store sales grew 1.6%, and the company said the harsh winter affected some key markets by a full percentage point.

Adjusted net earnings grew to $8.3 million from $6.1 million comparatively. The bottom-line benefitted significantly from credits in income tax expense.

Despite the company’s share price having tripled over the last two years, it is expensively priced, and I don’t think I’d be a buyer.

However, being not as pricey and much larger in terms of stock market capitalization, Dunkin’ Brands Group, Inc. (DNKN) could be worth a look. The company is the owner and franchiser of “Dunkin’ Donuts” and “Baskin-Robbins.”

This business has actually been a very good stock market performer, and it’s been quite consistent with its capital gains since listing in the middle of 2011.

The company’s stock chart is featured below:

 

Chart courtesy of www.StockCharts.com

For a company operating two mature brands in a highly competitive market (Dunkin’ Brands is virtually 100% operated by franchisees), this company generated very good fourth-quarter earnings results, and the marketplace has voted by bidding the stock.

According to the company, its fourth-quarter sales grew 13.3% to $183.2 million, representing a significant acceleration from the fiscal year.

U.S. comparable-store sales increased 3.5% over the same quarter of 2012, with the company adding 309 net new restaurants globally and 149 in the U.S.

Adjusted diluted earnings per share grew 26.5% to $0.43, while actual diluted earnings per share increased 22% to $0.39.

And not only were the numbers decent, but management also declared a 2014 first-quarter dividend of $0.23 a share, which is a very material increase of 21% over the company’s 2013 fourth-quarter dividend.

The company also authorized a new $125-million share repurchase program to the delight of investors. It’s no wonder Dunkin’ Brands recently shot higher on the stock market.

As a general operating rule, as a full-time equity investor, you want to be following virtually all restaurant stocks. (See “How to Profit from Institutional Investors’ Unwavering Love of These Stocks.”) They can be very good moneymakers, especially when economic conditions show slight improvements.

Countless restaurant stocks have been—and still are—doing well on the stock market, as revenues and earnings, while not robust, have been showing operational growth.

It’s an important component of consumer spending and an indicator of consumer confidence.

Dunkin’ Brands is running a good business for investors, and the stock is worth putting on your watch list.

 

This article Why I’ve Made It a Rule to Have These Stocks on My Watch List was originally posted at Profit Confidential