Why It’s Time to Buy Dunkin’ Dounts
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Leave it to science to confirm what many of us knew all along--coffee and donuts boost brain power.
According to a study published in the journal Human Psychopharmacology: Clinical and Experimental, researchers at the University of Barcelona discovered that a caffeine-glucose combo juices the brain in terms of attention and memory.
Perhaps stock analysts at Lazard Capital were sipping coffee and enjoying a glazed doughnut when they initiated coverage for Dunkin' Brands (NASDAQ: DNKN) with a Buy rating and gave shares a $51 price target, which would make for some sweet upside (16%). Or, perhaps they simply saw plenty to like about the fast food giant.
Headquartered in Canton, Mass., Dunkin' Donuts has more than 10,500 locations in some 31 countries. In the eastern United States, outlets are familiar sites in every state. That hasn’t been the case on the country’s West Coast—until now.
Dunkin' Donuts is mulling expansion opportunities in Los Angeles, Riverside, San Diego, San Bernardino, Ventura and Orange counties. It plans to opened new restaurants in these regions by 2015.
Also, Dunkin’ Donuts continues to introduce new items as it expands beyond its signature coffee and donuts. The company just debuted a line-up of “hot & spicy” breakfast sandwiches, and frozen beverages to wash them down with.
In addition, Dunkin' Donuts is on track to beat rivals McDonald’s (NYSE: MCD) and Starbucks (NASDAQ: SBUX) in launching the fast-food industry's first gluten-free pastries nationwide. Gluten-free cinnamon sugar doughnuts and blueberry muffins with be available in participating Dunkin' stores this year.
Gluten is a protein complex found in wheat flour. While a growing number of people are allergic to the protein, going gluten-free has become a fad diet popular among some high profile celebrities. Gluten free foods are growing in popularity as a healthy option, and restaurants are moving to capitalize on the trend.
Dunkin's wheat-free pastries will be packaged separately to avoid contamination from other foods that contain wheat flour, according to the company. Tested in a few Massachusetts locations, the company "is pleased with the results."
Starbucks is also considering selling gluten free products following the purchase last year of La Boulange, a bakery that sells organic breads. In the meantime, the Seattle-based coffee behemoth continues to perk up its portfolio with new beverages. The company is testing cold-foam mocha drinks and handcrafted sodas in some markets.
Plus, in efforts to get coffee junkies to think of Starbucks as more than just a java joint, Starbucks is aiming to boost sales by making food a bigger attraction. Several new sandwiches, salads and a brown rice bowl have recently been launched and well received.
The Seattle based coffee giant has a market cap of $50.66 billion, pays a $0.21 per share quarterly dividend, and is currently trading at a 52-week high thanks to an upgrade from Argus and fresh $77 price target. Shares are up 25% year-to-date.
Meanwhile, McDonald’s continues to receive raves from even the most discerning palates with is legendary burgers and fries--comfort food. Yet the company is on a non-stop mission to develop new ideas and recipes.
Its new Egg White Delight has delighted health conscious diners, while the new Bacon Habanero Ranch Quarter Pounder appeals to bacon lovers.
Expected soon are “shaker fries,” following solid success in Asia. The concept is simple: a small bag of fries and a packet of special seasoning (think zesty ranch, garlic, cheese, etc. etc.) and shake.
The fast-food king just announced global comparable sales rose 2.6%. The strongest growth came from the U.S., where breakfast items indeed drove growth.
The company has whopping $100 billion market cap and shares yield a hearty 3.09%. Goldman Sachs has a neutral on the stock with a price target of $106, reflecting a potential 6% upside.
Dunkin' is America’s all-day everyday favorite
Dunkin' looks poised to continue to shake up and wake up customers with new products, new launches, new locations and profits.
The chain enjoys an extremely loyal following. Service is swift, stores are clean and prices are competitive with McDonald's and less expensive than Starbucks'.
Founded in 1950, Dunkin' Donuts is America’s favorite all-day, everyday stop for coffee and baked good. It’s the market leader in the hot, regular, decaf, flavor, and iced coffee category. Every day, on average, Dunkin’ sells more than 30 cups of brewed coffee each second. Every year it pours 1.5 billion cups.
For the full-year of 2012, Dunkin' Donuts sales amounted to $6.9 billion. New initiatives should jolt sales further this year.
The company has a solid market cap of $4.71 billion.
Daily volume is robust. Over the last 30 days, 649,733-992,631 shares changed hands.
Institutions are big fans, holding 95% of the company's 106.27 million outstanding shares.
The company pays a saccharine $0.19 per share quarterly dividend, giving the stock a tempting 1.72% yield. At last check, shares were trading at a year high.
Dollars to donuts, Dunkin' Donuts shares look like a buy.
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Diane Alter has no position in any stocks mentioned. The Motley Fool recommends McDonald's and Starbucks. The Motley Fool owns shares of McDonald's and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!