Why Dunkin' Brands Stock Rose 11% in October

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What happened

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Dunkin' Brands (NASDAQ: DNKN) stock rose 11% last month, according to data provided by S&P Global Market Intelligence, beating the broader market's 2.2% gain.

The boost pushed Dunkin' stock back into record territory, up 12% in 2017 even as peer Starbucks has held flat.

So what

October's bounce followed a mixed quarterly report from the coffee chain. Customer traffic ticked lower in the third quarter, and that pressure held comparable-store sales growth down to less than 1%.

On the other hand, Dunkin' Brands' 100% franchised business model generated a healthy 11% spike in operating profit.

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Now what

CEO Nigel Travis and his team still expect minor sales gains for the full year, and their aggressive store-expansion plans remain in place even though about 30 of the 340 stores they had expected to open this year will now launch in 2018. Those results aren't particularly strong, but investors chose to focus on a large debt-recapitalization initiative that should deliver plenty of excess capital.

It's a good bet that management will direct a large portion of those funds toward stock repurchases, and the extra demand for shares helps explain why the stock has jumped recently.

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Demitrios Kalogeropoulos owns shares of Dunkin' Brands Group and Starbucks. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool recommends Dunkin' Brands Group. The Motley Fool has a disclosure policy.