On Monday, Truist Securities sustained its Buy rating on Krispy Kreme (NASDAQ:DNUT) shares, with a steady price target of $15.00. The firm's analyst updated the financial model for the doughnut company, reflecting a reclassification of sales from Canada and Japan. These sales have been moved to the International segment from Market Development, prompting a revision of estimates for the fourth quarter of 2024.
The updated forecast by Truist Securities now sets the full-year 2024 (FY24) sales and EBITDA (earnings before interest, taxes, depreciation, and amortization) at approximately $1.677 billion and $205.8 million, respectively. This is a slight adjustment from the previous estimates of $1.678 billion in sales and $207.1 million in EBITDA.
The reclassification and the subsequent changes in the fourth-quarter estimates have also led to modified projections for the following two years. For the fiscal year 2025 (FY25), the sales and EBITDA are now expected to be $1.705 billion and $227.2 million, respectively. Similarly, for the fiscal year 2026 (FY26), the figures have been adjusted to $1.832 billion in sales and $259.7 million in EBITDA. These updated estimates show a minimal decrease from the prior forecasts of $1.707 billion/$227.4 million for FY25 and $1.834 billion/$259.9 million for FY26.
Despite these minor revisions, Truist Securities has decided to maintain its Buy rating and $15 price target for NASDAQ:DNUT. The analyst's statement emphasized the maintenance of the positive outlook and the unchanged price target for Krispy Kreme's stock.
In other recent news, Krispy Kreme has seen some significant developments. The company's Chief Growth Officer and President, International, Matthew Spanjers, is set to resign around December 31, 2024, according to a recent SEC filing. The reasons for this departure, as well as any potential successor, have not been specified.
In terms of financial performance, Krispy Kreme reported a net revenue of $380 million for Q3 2024, marking its 17th consecutive quarter of growth. However, due to the sale of a majority stake in Insomnia Cookies, the company's adjusted EBITDA declined by 20.7%. The company now anticipates full-year revenue to be between $1.65 billion and $1.685 billion.
Krispy Kreme also announced the successful launch of its doughnuts in McDonald's (NYSE:MCD) Chicago locations, with plans to expand this partnership to nearly 2,000 locations by the end of the year. This is part of the company's larger goal to expand consumer access to 35,000 points across 50 countries within three years.
InvestingPro Insights
To complement Truist Securities' analysis, InvestingPro data provides additional context for Krispy Kreme's financial position. The company's market capitalization stands at $1.9 billion, with a revenue of $1.71 billion for the last twelve months as of Q3 2024. This aligns closely with Truist's full-year 2024 sales estimate of $1.677 billion.
InvestingPro Tips highlight that Krispy Kreme's net income is expected to grow this year, which could support the analyst's positive outlook. However, it's worth noting that the company operates with a significant debt burden, and short-term obligations exceed liquid assets. This financial structure may impact the company's flexibility and risk profile.
The stock's P/E ratio of 66.71 suggests a high earnings multiple, which investors should consider in light of the company's growth prospects. An InvestingPro Tip indicates that Krispy Kreme is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.41, potentially signaling an undervaluation based on expected growth.
For investors seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for Krispy Kreme, providing a deeper dive into the company's financial health and market position.
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