Krispy Kreme Doughnuts downgraded to "hold"

11/24/03 - BB&T Capital Markets

NEW YORK, November 24 (New Ratings) – Analysts at BB&T Capital Markets downgrade Krispy Kreme Doughnuts (KKD) from "buy" to "hold," while lowering their estimates for the company.

Shares of Krispy Kreme Doughnuts, a specialty retailer of doughnuts, are currently trading at $40.60.

According to BB&T Capital Markets’ research note published this morning, the company’s Q303 results were in-line with estimates. The company’s fundamentals are likely to deteriorate in the near-term, thus warranting the current downgrade in rating, the analysts say. Krispy Kreme Doughnuts’ earnings are also expected to decline in 2004, the analysts mention.

BB&T Capital Markets mentions that Krispy Kreme Doughnuts is planning to accelerate the introduction of small size satellite stores in the near-term. The company’s operations in Canada remain profitable and its operations in Australia are likely to become profitable in the near-term, the analysts believe. The current valuation of Krispy Kreme Doughnuts’ stock is attractive, BB&T Capital Markets adds.

The EPS estimate for 2003 is $0.91, while the EPS estimate for 2004 has been reduced from $1.20 to $1.18. The P/E estimates for 2003 and 2004 are 44.6x and 34.4x, respectively.

BB&T Capital Markets downgrades Krispy Kreme Doughnuts from "buy" to "hold."