Stock of the day 09/06/2015 – Eros International PLC/Krispy Kreme Doughnuts Inc

Grab your doughnuts and head off to an Indian blockbuster, as Eros International and Krispy Kreme reveal their latest results on Wednesday.

A bit of a wobble at the start of 2015 has given way to yet another sustained period of rapid growth for Eros International PLC ahead of its Q4 2015 and full year earnings release. 2014 was a very strong year for Eros, with impressive bookends to the year helping to overcome a stagnant middle period. After opening 2014 at $11.08 a steep set of gains across the end of February and the start of March saw it jump around $5 to $15.26. Eros went on to exist in a $15 to $16 trading bracket between April and October, when another period of impressive growth set in, this time pushing the stock all the way to $22.53.


(Source: IT-Finance.com 09/06/2015)

Eros then entered 2015 just below this price at $21.58, but had fallen to a 4 month low by the middle of January. This saw the stock trade around $17 following a disappointing set of third quarter 2015 results, after having seriously impressed with the same quarterly release the year before. Like the middle of 2014, between the middle of February and the middle of May Eros failed to break out of a $16 to $17 bracket; however, a consistent surge in the past 3 and a half weeks has lifted Eros to a current trading price of $22.65 (09/06/2015) after hitting an intraday high of $23.44.

The $6 growth the company has seen since the middle of May has been due to a few things. There was the appointment of Prem Parameswaran as CFO and the announcement that Eros is to make 4 films with 2 Chinese studios in the next 3 years and therefore open itself up to an ever-growing market. Combine this with delisting rumours and the blockbuster success of ‘Tanu weds Manu returns’, and Eros was lifted to its current record highs.

Eros has a consensus rating of ‘buy’ with an average target price of $27.

Krispy Kreme Doughnuts Inc will need something extra sweet for investors with its Q1 2016 earnings release after the stock fell to 8 month lows in the past few weeks. After opening 2014 at $19.36, Krispy Kreme suffered a big blow this time last year when it announced its Q1 2015 results. Cutting cut its earnings forecast for the year and sparking a 15% stock decline, from $17.25 to $16.19. However the company managed to claw back its losses as 2014 continued, and it entered 2015 effectively flat on the year at $19.74.


(Source: IT-Finance.com 09/06/2015)

Big gains at the start of February helped lead Krispy Kreme to a 15 month high of $22.36, its best price since a 20% drop at the start of December 2013 when the company warned 2014 wouldn’t bring with it as aggressive an expansion as investors had got used to. This February 2015 boost was caused by the fact that the company had let its tax-asset protection plan to expire, a plan that was initially put in place to protect Krispy Kreme form a hostile takeover, a protective scheme no longer deemed necessary.

However, this boost didn’t last long, and at the start of March Krispy Kreme saw a near 7% decline, taking it back to $19, following its Q4 2015 results. Despite the company matching its EPS estimates of $0.17, the fact that it missed its revenue forecasts of $126.78 million to post $125.40 million was an unpleasant surprise for investors, and they reacted in kind. Whilst it recovered these losses by the end of the month, once again it began to tumble, and a horrid April and a limp May has left it at a current trading price of $17.38 (09/06/2015, IT-Finance.com).

Analysts are expecting Krispy Kreme to post Q1 2016 revenue of $136 million with earnings per share of $0.22; this has left the stock with a consensus rating of ‘buy’ with an average target price of $25.

Tuesday’s stock news:

Defying the rest of the mining sector, Vedanta Resources posted some serious gains this Tuesday, jumping around 4.7% following growing speculation that it is to merge with its subsidiaries Cairn India and Vedanta Ltd. The move would be designed to restructure the debt of both of the companies, and open up funds that may otherwise be unavailable to certain units.

The plastic packaging producer RPC Group was another big winner this morning after a strong full year report. The company’s revenue grew 17% to £1.222 billion, with similarly robust gains in operating profit (up 30% to £131.6 million) and earnings per share (up 12% to 15.4p). Investors were very impressed with these results, pushing RPC up 4% to a near 2015 high of £6.42.

On the other side of the gains/losses divide was Pets at Home, which underwent a bit of a kink in an otherwise impressive 2015 after private equity group Kohlberg Kravis Roberts put 108 million shares on the market. This sent Pets at Home 3% lower and meant the company couldn’t bask in last week’s strong full year results for long.