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Bull of the Day: Krispy Kreme (KKD)

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It is one of the biggest company turnarounds since the end of the Great Recession. Krispy Kreme Doughnuts, Inc. (KKD) was left for dead but defied naysayers and is expected to see double digit earnings growth in Fiscal 2014.

Krispy Kreme makes donuts and sells coffee in over 770 locations in 22 countries. It has an extremely loyal fan base for its signature product: the Original Glazed donut which is usually served warm, directly out of the oven.

Over-expansion early last decade tarnished the brand but it has slowly been able to turn it around.

On July 15, as testimony to the strength of the company, it announced that it had refinanced its secured credit facilities and retired the entire $22 million outstanding balance of its term loan. The retiring of the loan and the refinanced facilities was expected to save about $1 million in the first 12 months.

As of July 12, it had a cash balance of $55 million and an unused borrowing capacity on its revolving credit facility of $31 million.

It will also begin a new $50 million share repurchase program. That's significantly higher than the previous $20 million program that was completed in 2012.

Zacks Consensus Estimate Rises

Analysts like what they see. In the last 60 days, 3 estimates have risen for fiscal 2014 while only 1 has been lowered. The 2014 Zacks Consensus has risen to $0.62 from $0.57 in that time.

That is earnings growth of 31.9%.

But the analysts don't expect that to be the end of it. They also forecast another 13.4% earnings growth in fiscal 2015.

Big Earnings Beats

Krispy Kreme isn't expected to report earnings until Aug 28. It has really turned around its earnings track record as well. After a history of misses, the company recently started posting big beats.

It has surprised 3 out of the last 4 quarters by an average of 38%.

This Zacks Rank #1 (Strong Buy) isn't cheap. It has a forward P/E of 31. But an investor is paying for the big EPS growth and is not looking for value.

The consumer is still splurging on food and Krispy Kreme has a loyal following. It has over 4 million likes on Facebook and 61,000 followers on Twitter, many of which share their tales of driving for miles just to indulge in one of its donuts.

That's the power of the Krispy Kreme brand. For investors looking for a restaurant chain which still has its mystique, look no further than Krispy Kreme.

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Tracey Ryniec is the Value Stock Strategist for She is also the Editor of the Turnaround Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

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