JACK

McDonald’s Enters the Chicken Sandwich Wars

by

Image Shown: Shares of McDonald’s Corporation have pulled back over the past couple of months after an epic run during most of 2019, which we view as the market recognizing shares of MCD had gotten way ahead of themselves. By Callum Turcan McDonald’s (MCD) is testing out a new crispy chicken sandwich offering in two US cities; Knoxville, Tennessee and Houston, Texas. This pilot project is expected to run through January 2020. While McDonald’s offers the ‘McChicken, its new chicken sandwich offering is far more substantial (the McChicken is to a chicken sandwich what the ‘McDouble’ is to a burger) and meant to compete with offerings from privately-held Chick-fil-A and Restaurant Brands International Inc’s (QSR) Popeyes Louisiana Kitchen. We still … Read more

Our Reports on Stocks in the Restaurants – Fast Food & Coffee/Snacks Industry

by

Structure of the Restaurants – Fast Food & Coffee/Snack Industry The restaurant industry has benefited from a long-term trend toward eating out, but the space has become increasingly more competitive as new concepts are introduced and successful chains expand. Not only are there pricing pressures and trade-down threats, but rising costs for commodities and labor have pressured profits. Barriers to entry are low, and many constituents have a difficult time differentiating themselves. We tend to like larger chains that benefit from scale advantages and international expansion opportunities, though niche franchises can be appealing. We’re neutral on the structure of the group. For our coverage of firms in the Restaurants – Fast Food & Coffee/Snack industry, please click here.

McDonald’s Not on the Value Menu

by

We can’t get anywhere close to McDonald’s share price with our discounted cash-flow valuation process. That doesn’t mean that shares are destined to fall, but it may indicate that the stock has pulled forward future returns. In any case, investors in McDonald’s should be cautious. By Brian Nelson, CFA McDonald’s (MCD) has done a wonderful job in years past, pursuing all-day breakfast and transitioning (even) more to a franchise business model, but these changes are now behind the fast-food restaurant. Our fair value estimate for McDonald’s is in the mid-$150s (its shares are trading over $200), and frankly, we’re having a very difficult time coming anywhere close to how high the market is valuing shares. During the firm’s second-quarter results, … Read more

Cracker Barrel ‘s Lofty (and Hidden) Dividend Yield

by

Image Source: Cracker Barrel Presentation (10/17) By Brian Nelson, CFA Incredible. Cracker Barrel (CBRL) just issued announced another special dividend, to the tune of $3 per share. This special dividend is in addition to the regular quarterly dividend of $1.30 per share, which was increased 4% from the previous quarterly dividend of $1.25 per share. All in, annualizing the new quarterly rate and including the special dividend in the sum, Cracker Barrel yields nearly 5% at the time of this writing. You won’t hear many talking about the firm’s lofty yield because a large part of it has been from the special-dividend variety, which has been recurring for the past many years. On a fundamental basis, we have no qualms … Read more

Cisco Delivers, Deere Disappoints, Pinterest Plummets, More Reports

by

Cisco Delivers, Deere Disappoints, Pinterest Plummets, More Reports — In alphabetical order by ticker symbol: AMAT, BIDU, CSCO, DE, FLO, INTC, JACK, PINS, WMT — Applied Materials (AMAT): Applied Materials reported better-than-expected second-quarter fiscal 2019 results May 16, but the headline print wasn’t that exciting. Revenue dropped 23%, its operating margin gave back 6.3 percentage points, and diluted earnings per share dropped 34%, but the results were “toward the top-end of (its) guidance range, reflecting solid execution across the company in a business environment that remains challenging.” The chip-maker’s risk profile is too high for our taste, and we just have a hard time getting comfortable with the instability of operating results. We value shares of Applied Materials at $48 each, … Read more

Earnings Roundup: Fast Food and Coffee

by

Image Source: Phillip Pessar Let’s take a look at some of the biggest restaurant operators in the fast food and coffee space. Established players continue to refranchise their massive global chains, and innovation in the digital channel may ultimately separate some from the pack. By Kris Rosemann Starbucks Comps Grow Nicely; Reiterates Fiscal 2019 Guidance Starbucks’ (SBUX) fiscal 2019 first quarter report, released January 24, revealed top-line strength in the form of 9% year-over-year net revenue growth as global comparable store sales grew 4%. A 3% increase in average ticket on a global basis was key to the increase in comparable store sales, and US comparable store sales growth came in at 4% from the year-ago period despite transactions being … Read more

Valuentum Stock Screeners

by

This article was sent to members via email December 29. That email can be accessed at the link that follows this article. By Brian Nelson, CFA Hi everyone, I wanted to provide an update with respect to Valuentum’s stock screeners. We believe our stock screeners are among the most robust when it comes to providing forward-looking data, or data that is important with respect to the investment decision-making process. We publish screens in each of the monthly newsletters, but we also provide a basic weekly screener for download on the left column of the website, “Download Weekly Stock Screener (xls) — login required.”   We also have other products. The more robust DataScreener, for example, is part of the quarterly Financial … Read more

Market Mayhem — Alerts for Members

by

During these extremely volatile times, it’s important to stay focused. On December 15, we informed all of our members to “Pay Attention.” Shortly thereafter, we notified members of the potential for a stock market technical breakdown. This morning, we offered a pre-market briefing about the importance of thinking about portfolio protection. For Best Ideas Newsletter and Dividend Growth Newsletter members: http://campaign.r20.constantcontact.com/render?preview=true&m=1110817109903&ca=e2406cd6-c113-4344-8731-493f33fc44a4&id=preview For High Yield Dividend Newsletter members: http://campaign.r20.constantcontact.com/render?preview=true&m=1110817109903&ca=b3ba530f-38b3-489a-ac96-2961dca89c6b&id=preview For Exclusive members: http://campaign.r20.constantcontact.com/render?preview=true&m=1110817109903&ca=ba6d90c0-4433-48b2-9b8a-aac4ddf9006e&id=preview We’re here for any questions. Please just let us know how we can help! Kind regards, Brian Nelson, CFA  brian@valuentum.com

Comps Accelerate and Margins Expand in Chipotle’s Third Quarter

by

Image Source: Mike Mozart The once beaten down fast casual restaurant chain Chipotle is back to delivering solid comparable restaurant sales growth thanks to menu price increases, and restaurant level operating margin expanded significantly as lower marketing and promotional spending was required to appease cautious consumers. By Kris Rosemann Simulated Best Ideas Newsletter portfolio idea Chipotle (CMG) reported 8.6% year-over-year revenue growth in the third quarter of 2018, results released October 25, driven by new store openings and a 4.4% increase in comparable restaurant sales. Average check moved higher from the year-ago period due in part to a 3.8% effective menu price increase but was partially offset by a 1.1% decline in comparable restaurant transactions. This weakness in traffic was … Read more

In The News: 10-Year Treasury Yield, Wage Pressure in Restaurants, Cannabis Volatility

by

Let’s take a look at some of the hottest topics around the markets. By Kris Rosemann Financial stocks (XLF) rallied during the trading session September 19 as the 10-year US Treasury yield crossed the 3% threshold for the first time since late May 2018 and investors anticipated rising net interest margins for banks. Strong levels of consumer confidence are likely helping the banking sector as well, but we’re watching closely as the Fed continues on its hawkish path with two more rate hikes expected in 2018 after completing seven hikes since December 2015. The potential for an inverted yield curve cannot be ruled out, but some observers are expecting a continued rise in the 10-year Treasury yield through the end … Read more