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2022 Oil & Gas Market Update: “The Outlook for Crude Oil Prices Remains Quite Bullish”

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Transcript Hello, this is Callum Turcan, Associate Director of Research at Valuentum Securities. WTI and Brent have pulled back moderately from recent highs, though near-term futures remain just above $100 per barrel which is well above levels seen last year. As of early July, both WTI and Brent are in backwardation, meaning spot prices are trading at a higher price than later dated future contracts. In other words, the trajectory of future crude oil prices is expected to have a downward slope. Please note that backwardation does not mean that things are going to rapidly deteriorate for the global energy complex, as this dynamic is due to global oil inventories steadily declining over the past two years or so. Backwardation … Read more

Price Is Almost Always Different Than Value

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It was January 10, 2000. America Online had just announced that it would acquire Time Warner to create the largest media company. The purchase price amounted to more than $160 billion, and the combined entity was estimated to have a market capitalization of ~$350 billion. The deal was the biggest corporate merger to that date and was expected to launch the next Internet revolution, according to then-CEO of AOL Steve Case. The transaction valued Time Warner at about $108 per share, a huge premium over its price of $64.75 per share the trading session before. AOL’s shares closed at $72 the day of the announcement. Just a couple years later, things were quite different. When it reported full-year 2002 results, … Read more

Restaurant Industry Update

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The fast-food (quick-service) breakfast wars have intensified. It has become a high-stakes game for all participants, and most have gone all-in to capture market share, to use poker parlance. The NPD Group, a leading global information firm, noted that the pace of expansion for fast-food breakfast across the restaurant industry has been a key bright spot, and executives across the industry are taking note: Quick service, which accounts for about 80 percent of total restaurant morning meals, showed the strongest increase in breakfast visits of all restaurant segments with a 4 percent increase in the year ending December 2013 period compared to year ago, reports NPD CREST, which every day tracks how consumers use restaurants and other foodservice outlets. Morning … Read more

McDonald’s Operating Income Flat in Fourth Quarter

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When a firm’s Valuentum Dividend Cushion score starts to fade as McDonald’s (MCD) score did recently, it shouldn’t come as a surprise that the trajectory of its dividend growth will start to fade, too. McDonald’s recently increased its dividend 5%, but payout expansion will become increasingly more difficult if the fast-food giant continues to post results like its fourth-quarter performance, released Thursday. During the period, McDonald’s revealed a global comparable sales decline of 0.1% as a result of a negative comparable guest count and flat consolidated operating income (up 1% excluding currencies). This performance, of course, is not conducive to large future dividend increases. In the US, McDonald’s comparable sales decreased 1.4% in the fourth quarter, as operating income advanced … Read more

McDonald’s US Comparable Sales Fall

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On Monday, McDonald’s (MCD) reported lackluster November comparable sales. European comparable sales (comps) were solid, up 1.9%, but comps in the APMEA (Asia/Pacific, Middle East and Africa) and US weighed on expansion, falling 2.3% and 0.8%, respectively. Performance in the APMEA was weighed down by weakness in Japan, while US comps suffered from heightened competitive activity and relatively flat industry demand trends that were only partially offset by strength in breakfast, chicken menu choices and expanded value offerings. Systemwide sales advanced 3.1% in constant currencies during the month. The news from McDonald’s is unique in that it runs counter to a report from the National Restaurant Association, released December 2, that the Restaurant Performance Index, RPI (1), hit a four-month … Read more

The Big Burger Trade-up

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Casual dining chain Red Robin (click ticker for report: ) reported strong second quarter results last week. Revenue jumped 6.5% year-over-year to $238 million, just a touch shy of consensus estimates. Conversely, earnings per share surged 48% year-over-year to $0.77, easily exceeding consensus expectations. Image Source: RRGB 2Q FY2013 Slides The most positive news from Red Robin, in our view, was the robust same-store sales growth rate of 4.3%. While the firm was lapping just a 0.8% increase in the year prior period, the increase was a nice jump sequentially, underscoring the effectiveness of the company’s brand transformation. Traffic declined 0.7% year-over-year, but that was far better than the 3.1% decline experienced by the average industry competitor. The combination of … Read more

McDonald’s Falling Prey to Competition

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Fast-food giant McDonald’s (click ticker for report: ) reported weak October same-store sales numbers Thursday. CEO Don Thompson continues to invite criticism as sales and profits have begun to fall since taking the reins from legendary CEO Jim Skinner. Global same-store sales fell 1.8% year-over-year, while global sales fell 0.8% (+0.6% ex-currency). Weakness was broad-based, with US same-store sales falling 2.2% year-over-year, Europe falling 2.2%, and Asia-Pacific, Middle East and Africa falling 2.4%. While we think Europe can be explained by overwhelmingly negative macroeconomic sentiment and lower price-points, we think the US is more of a company-specific issue. Competition in the US market was fairly dormant for the past several years, with Wendy’s (click ticker for report: ) and Burger … Read more