Krispy Kreme (KKD) is set to release earnings next Monday, June 2nd. After falling short of analyst expectation’s for Q4 2014 in March by a penny, the stock sold off about 67 cents. But when the company release fiscal 2015 guidance with high expectations it rallied again. KKD estimated EPS of $0.73-$0.79 on net income of $48 million–. It raised estimates based on its strong growth and ability to cut overhead costs increasing its profit margin.
For Q1 analyst consensus estimates are at $0.23 per share on $126 MM in revenue, expecting an EPS of $0.71 on the year. Krispy Kreme management ratifies its heightened estimates citing the harsh winter as a catalyst behind a weak Q4. The stock’s down almost 3% YTD trading at about the midpoint of its 52-week range of $13.55-$26.63.
Personally, I’m long Krispy Kreme because it’s delicious. But let’s take a look at the historical earnings movements and the trade setup.
Past eight quarters’ earnings reports:
03/13/14 $19.88 $20.11 $+0.23 (1.2%)
12/03/13 $24.55 $19.59 $-4.96 (-20.2%)
08/30/13 $23.23 $19.72 $-3.51 (-15.1%)
05/31/13 $14.26 $17.32 $+3.06 (21.5%)
03/15/13 $14.95 $14.54 $-0.41 (-2.7%)
11/20/12 $7.54 $9.31 $+1.77 (23.5%)
08/23/12 $6.95 $7.31 $+0.36 (5.2%)
05/21/12 $6.01 $6.62 $+0.61 (10.1%)
Historical Earnings Move: Mean 12.4%, Median 12.6%
The Trade: Buying the KKD June 20-21 Call Spread for $0.25 debit
Risk: $25 per 1 lot
Reward: $75 per 1 lot
Breakeven: $20.25
It is a sideways looking chart and looks to be able to move either way.