American doughnut company and coffeehouse chain Krispy Kreme, Inc. (DNUT) reported mixed debut Q2 results since its listing in July. The company missed earnings expectations by a cent but topped revenue estimates driven by robust performances across all segments.
Adjusted earnings of $0.13 per share more than tripled on a year-over-year basis but fell a cent short of analysts’ expectations of $0.14 per share. The company reported earnings of $0.04 per share in the prior-year period.
Encouragingly, revenues jumped 42.6% year-over-year to $349.2 million and exceeded consensus estimates of $333.36 million.
The increase in revenues reflected a 23% surge in organic revenues attributable to robust growth in the international segment and the current ongoing transition of its U.S. and Canada businesses into a fully-implemented Hub and Spoke model.
Additionally, adjusted EBITDA increased 77.8% to $52.4 million, while adjusted EBITDA margin improved 300 bps to 15%. (See Krispy Kreme stock charts on TipRanks)
Krispy Kreme Issues FY2021 and Long-Term Outlook
Based on strong Q2 results, the company issued full-year 2021 and long-term guidance. For FY2021, the company forecasts revenues to grow 19.4% – 23% to between $1.34 and $1.38 billion, versus the consensus estimate of $1.34 billion. Organic revenue is projected to grow 10% to 12% compared to FY2020.
Furthermore, the company forecasts adjusted EBITDA growth of 22.4% – 27.2%, and adjusted net income growth of 46.4% – 60.6%.
Longer-term, the company expects to achieve organic revenue growth of 9% – 11%. On top of this, the company predicts adjusted EBITDA growth of 12% – 14%, along with adjusted net income growth of 18% – 22%.
Markedly, management is confident of surpassing the above-mentioned long-term targets in the full year 2022.
Notably, the company will pay an initial cash dividend of $0.035 per share for the third quarter. Furthermore, it plans to maintain stable dividends until it reaches its long-term net leverage target of 2.0x.
Commenting on the quarterly performance, Krispy Kreme CEO Mike Tattersfield commented, “Our continued delivery of organic revenue growth and Adjusted EBITDA ahead of our expectations demonstrates that our omni-channel approach is working.”
Tattersfield further added, “As a result, we are confident in our short and long-term growth targets as we continue to execute on our strategy, providing awesome fresh doughnuts as we become the most loved sweet treat brand in the world.”
Evercore ISI analyst David Palmer recently reiterated a Buy rating on Krispy Kreme with a price target of $20 (42.5% upside potential).
Consensus among analysts is a Moderate Buy based on 8 Buys and 3 Holds. The average Krispy Kreme price target of $20.90 implies 48.9% upside potential to current levels.
DNUT scores an 8 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.