Is Krispy Kreme a Buy After Its Latest Earnings Report?

After what had been a rough year for the longtime donut maker, Krispy Kreme (NASDAQ:DNUT), a positive earnings surprise on Nov. 5 sent the stock soaring.

Krispy Kreme reported an $0.08 loss per diluted share in its third quarter, a 3-cent improvement from the same quarter in 2025. Net revenue of nearly $329 million fell 12.5% year over year, largely as expected, due to the company's refranchising efforts.

When adjusting for restructuring expenses, tax-specific adjustments, and other items not core to the operating business, Krispy Kreme reported adjusted earnings per share of $0.06, up from $0.01 one year ago.

Is the stock a buy after Krispy Kreme's third-quarter earnings report?

Image source: Getty Images.

Turnaround plan begins to show progress

Krispy Kreme has struggled immensely over the past five years, with its stock down over 72% due to a range of issues, including high debt, competition, and shifting consumer preferences.

The company has also failed to pivot accordingly, with strategic moves such as its partnerships with McDonald's and Walmart proving flawed. Currently, the company is focused on a less capital-intensive strategy that involves refranchising, which CEO Joshua Charlesworth believes can improve returns on capital, expand margins, and drive sustainable growth.

This year, Krispy Kreme has opened 98 doughnut shops globally, nearly all of which are franchised, and decreased its capital expenditures by nearly 65%.

Free cash flow is improving, with the company generating negative free cash flow of nearly $10 million in the quarter, compared with negative $92 million in the third quarter of 2025.

Krispy Kreme has also lowered its net leverage ratio, which is net debt divided by adjusted EBITDA, from 6.7x to 5.5x, largely through net debt reduction and some increase in adjusted EBITDA.

"Today, franchisees generate approximately 42% of our system wide sales and we expect that percentage to grow as we continue to pursue additional refranchising opportunities," Charlesworth said on the company's third-quarter earnings call. "We are disciplined in selecting the right partners both internationally and in the U.S. to maximize value and position the brand for long-term growth."

Krispy Kreme also raised its full-year guidance by increasing and narrowing its net revenue outlook to $1.35 billion to $1.4 billion, up from $1.25 billion to $1.35 billion. The company also lowered its capex outlook to $40 million to $45 million, down from $50 million to $60 million.

Is the stock a buy?

Following the earnings report, Wall Street analysts raised their price targets on the stock. Bank of America analyst Sara Senatore maintained a buy rating on the stock and raised her price target from $5.50 to $6.30 per share, implying significant upside from current levels.

The quarter definitely represents good news, as the refranchising efforts appear to be the financially prudent direction moving forward. If Krispy Kreme can keep executing and deleveraging the balance sheet, then there is definitely more upside ahead.

Still, it's likely a bit premature to take on too heavy a position in the doughnut maker just yet, as the impacts of broader changes on the doughnut industry, such as GLP-1 drugs, are still not immediately clear.

The company's high leverage remains a risk if the turnaround doesn't work. I would place Krispy Kreme in the more speculative part of your portfolio for now and watch for continued progress.

Bank of America is an advertising partner of Motley Fool Money. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool recommends the following options: long January 2028 $320 calls on McDonald's and short January 2028 $340 calls on McDonald's. The Motley Fool has a disclosure policy.