Krispy Kreme Analysts React To First Earnings Report: 'Not Likely To Sway Investors'

Krispy Kreme Inc DNUT shares have struggled since the company completed its IPO on July 1. On Tuesday, the donut maker released its first quarterly earnings report since the IPO, and the numbers underwhelmed the market.

Krispy Kreme reported adjusted second-quarter EPS of 13 cents, missing analyst estimates of 14 cents. Second-quarter revenue was $349.2 million, beating analyst expectations of $333.4 million. Revenue was up 43% from a year ago.

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Looking ahead, Krispy Kreme guided for full-year revenue of between $1.34 billion and $1.38 billion and adjusted earnings of between $62 million and $68 million.

The Krispy Kreme IPO got off to a shaky start when the company priced its IPO shares at just $17, well short of its target range of between $21 and $24. The stock popped 23% on its first day of trading, finishing the day at $21. Unfortunately for investors, Krispy Kreme shares haven’t made it back to $21 ever since. In fact, the stock is now trading back down at $13.90, well below its IPO price.

In fiscal 2020, Krispy Kreme reported 17% revenue growth and a net loss of $60.9 million. Krispy Kreme previously went public during the dot-com boom 21 years ago. JAB Holding later took the company private in 2016, restructuring its business prior to the recent IPO.

Voices From The Street: Wells Fargo analyst Jon Tower said Wednesday Krispy Kreme still has a lot to prove to investors.

“2Q results and outlook are not likely to sway investors to a thesis, but we do believe this check-in should work to reverse the stock's relative underperformance since the IPO (down 27% vs. the S&P500 +2% since 7/2/21) as '22 Street numbers likely move modestly higher,” Tower wrote.

Tower also said Krispy Kreme made progress on its online sales initiatives in the second quarter, reporting more than 16 million U.S. media impressions. In addition, company shops reported 19% of total sales were digital in the quarter.

Morgan Stanley analyst John Glass said Krispy Kreme’s $89.2 million in international sales were particularly impressive.

“Through the balance of the year, our sales outlook is little changed but cost inflation will be more of a factor in 3Q than we originally factored in (also the seasonally slower quarter),” Glass wrote.

Ratings And Price Targets:

• Wells Fargo has an Equal Weight rating and an $18 target.
• Morgan Stanley has an Overweight rating and a $23 target.

Photo: Courtesy Krispy Kreme