By Lindsey Bell, TheStreet

 

Dunkin' Brands (DNKN) and Starbucks (SBUX) make most of their money selling coffee, but their customer base couldn't be more different. Which has the winning formula? This week's earnings reports will answer that question.

 

The health of consumers, the engine of the U.S. economy, is investors' biggest concern at the moment. Surprisingly, both luxury and discount retailers are doing well, with those in the middle -- Wal-Mart (WMT) and Target (TGT) -- grinding along.

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With the coffee companies, one caters to less-affluent consumers, dominates the East Coast, is expanding internationally and operates under a franchise model. The other supplies a higher-end luxury product, has a widespread national and international presence, is reaching the masses through a fast-growing consumer-packaged division and operates under a company-owned model.

Both are driving sales higher by innovating and opening new stores, leading to premium prices for their stocks. But will they both have what it takes to validate that valuation this earnings season?

 

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The key theme for both companies is expansion. Dunkin' Brands went public in July mainly to fuel store openings. The Dunkin' Donuts chain generates about three-quarters of its revenue from the U.S., while the New England coffee purveyor has only 2% of stores in the West. That's the battle ground, as Seattle's Starbucks is the dominant player on the West Coast. After four years of closing stores, Starbucks is going the other direction in 2012. Growing abroad is the future, especially in the emerging markets of China, Brazil and India.

International expansion also is on the agenda for Dunkin' Brands. With Neal Yanofsky, the president of the international unit, leaving the company a month ago, all ears will be listening for any change of direction from prior plans to generate annual unit increases overseas by about 2% to 5% for each brand.

 

Prices are on investors' minds. As commodity prices for coffee and milk rose this year, Starbucks and Dunkin' charged customers more. As neither is likely to drop prices, profit margins could benefit from the recent downward move in commodities.

 

First up will be Dunkin' Brands, the parent of the Dunkin' Donuts and Baskin-Robbins brands, on Tuesday. Dunkin' went public during the third quarter, the period for which the company will release results. According to Bloomberg, analysts are estimating earnings of 26 cents per share.

 

Investors will have a couple of days to digest Dunkin Brands' results before hearing from Starbucks on Thursday. Starbucks will report results for its fourth quarter and fiscal 2011. Analysts expect to see earnings of 36 cents per share.