On January 19, Zacks Investment Research upgraded Krispy Kreme Doughnuts Inc. to a Zacks Rank #1 (Strong Buy) backed by its international expansion.
Why the Upgrade?
Strong momentum in the company's underlying business is prompting analysts to raise earnings expectations. As a result, EPS estimates for this year and next are going up.
Krispy Creme is rapidly expanding into emerging markets. that insulates it from the ongoing macroeconomic headwinds across the globe. During 2012, Krispy Kreme inked several development deals with franchises across India, Russia, the Philippines, the United Kingdom and other countries. It includes the company’s deal with Star360 Group to set up 15 Krispy Kreme franchise locations in Singapore over the next five years. More recently, in December 2012, Krispy Kreme opened its 500th international location in Mexico. In January 2013, Krispy Crème opened its first franchised outlet in the city of Bangalore. The latest opening came in the wake of the signing of a development deal between Krispy Kreme and Citymax Hotels Pvt. Ltd in June 2012.
The company has beaten estimates back-to-back in the second and third quarters of fiscal 2013 by 50.0% and 40.0%, respectively. At its third quarter earnings call, the company also upped its expectations for the upcoming quarter.
Krispy Creeme also has a Zacks Earnings ESP (Read: Zacks Earnings ESP: A Better Method) of +9.1%. This is very meaningful and a leading indicator of a likely positive earnings surprise in the coming quarter.
Other Stocks To Consider
You can also consider investing in stocks that offer exposure attractive retail restaurants segment like AFC Enterprises Inc. , BOB Evans Farms Inc. and Luby’s Inc. that carry a Zacks Rank #2 (Buy).