Dunkin' Donuts Earnings: Will Investors Find a Sweet Result?

Dunkin' Brands has dominated the news waves the past week -- some for good reasons, and some for not.

Last week, Dunkin' Brands, parent company of Dunkin' Donuts and Baskin-Robbins, announced its IPO at $19 and immediately saw its stock price go through the roof. Shares went up more than 40 percent, as investors fell in love with the company's potential West Coast growth opportunities.

But this week the company also captured the public's attention for a different reason, as a New Jersey Dunkin' Donuts employee was caught selling sexual favors while working at one of the company's retail stores. The company's gift cards were also embroiled in an ATM scam that netted a man over $17,000.

All the news leads up to Dunkin' Brands' first quarterly earnings announcement as a publicly traded company on Wednesday, as investors wait for the company's announcement with bated breath.

Factors to Keep an Eye on

The biggest factor to keep an eye on, especially for long-term investor value, is the same store sales numbers that Dunkin' Brands posts in its first quarterly report. Dunkin' is most often compared to coffee king Starbucks, and last week Starbucks posted much better than expected earnings numbers boosted by strong same-store sales.

Same-stores sales -- sales at stores open for at least one year -- is something that Dunkin' Donuts has struggled with in the past, posting an annual growth of only 2 percent last year.

This is the first time Dunkin' will be revealing its same-store sales quarterly, not annually, which is something that investors will likely key in on. It's doubtful the store matches Starbucks' 8 percent growth, but what will be important is just how big it misses the number posted by Starbucks last week.

Another factor is how big of an impact its Captain America promotions had on sales. The company heavily promoted Captain America cups, new Coolatta flavors, and specialty donuts ahead of the superhero movie's debut on July 22^nd.

The promotions, paid for by the makers of "Captain America: The First Avenger," got good press for its creative red, white, and blue doughnuts and drinks. Dunkin' is certainly hoping that the film's success led to some increases in sales.

What to Expect Short-term

On the most basic level you can expect Dunkin' to post relatively good numbers on Wednesday. Looking at things from a common sense standpoint, one would imagine that Dunkin' wouldn't have its IPO a week before its earnings numbers if the company had bad numbers.

The confidence by the company to do so show it feels good about Wednesday's earnings report. The big questions are just how good the numbers are and what the same-store sales numbers are. If those numbers are big, expect the company's share price to go through the roof again.

But on Tuesday, the day before its first earnings report, Dunkin' shares dropped 6.41 percent, to $27.76.

What to Expect Long-term

For many investors, the first two earnings reports may not be the biggest concern, however. The bigger issue for them will be how the company will perform a quarter or two into its major expansion plans.

Dunkin' is banking on its ability to be successful in "white spaces," where the donut and coffee company doesn't have a major market impact. The company is heavily concentrated in the Northeast area and has seen considerable success over its history, but there is no guarantee that the Midwest or West Coast will buy into its products.

If Dunkin' isn't successful out West in its expansion efforts it won't be reflected right away in the numbers. But if the company meets, or comes close to, its expectations of adding 250 stores per year-it will certainly be reflected in the numbers in a year or two from now.

Shorting the stock has become a popular move by some investors of late, as some speculate the "coffee bubble" is bound to collapse.