Dunkin' IPO Underwriter Gives 'Sell' Rating

Investors as well as donut and coffee fans might remember last month when Dunkin Donuts' IPO was the hottest thing on Wall Street. The stock had gained 42 percent since Dunkin' Brands Group Inc.'s initial public offering in July. But now, one of the banks that managed the IPO has issued a "sell" rating on the company which operates Dunkin' Donuts and Baskin-Robbins stores.

Goldman Sachs Group Inc. helped managed Dunkin' through its IPO, but on Tuesday the firm lowered its investment rating on the company.

Dunkin' has 6,800 U.S. stores, concentrated in New England, New York and other eastern areas. Last month the chain started selling K-Cups -- single serving coffee and tea cups -- for Green Mountain Coffee Roasters Inc.'s Keurig Brewing machine. Still, that boost is not enough to warrant holding the stock, according to Goldman Sachs.

Michael Keller, a Goldman Sachs analyst in New York, wrote in a note Tuesday after initiating coverage on Dunkin' (NASDAQ: DNKIN) that "despite a boost" from the launch of single-serve K-Cups, the company's U.S. business is "highly macro-sensitive against an uncertain economic backdrop."

Dunkin' Brands raised $423 million in its IPO and Goldman Sachs was among the banks leading the offering, and the firm exercised the over-allotment option to buy 3.3 million additional shares for $19 each.

Dunkin' has said it plans to grow its number of U.S. stores to 15,000 in the next 10 years. Keller estimates in his note that Dunkin' may be able to open roughly 3,200 more Dunkin' Donuts in the U.S., resulting in a total of 10,000 shops instead.

Dunkin' stock was down Tuesday on the news of Goldman's sell rating 1.96 percent, or 53 cents, to $26.47.