MCD

McDonald’s Sees Weakness from Lower-Income Consumers

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By Brian Nelson, CFA On November 5, McDonald’s (MCD) reported third quarter results that missed expectations on both the top and bottom lines. Global comparable sales came in better than expected at 3.6%, with broad-based growth across all segments. U.S. comps increased 2.4%, international operated markets increased 4.3%, while international developmental licensed markets increased 4.7%. Consolidated revenues increased 3% (1% in constant currencies), while global systemwide sales were over $36 billion for the quarter, an increase of 8% year-over-year (6% in constant currency). Management had the following to say about the quarter: We increased global Systemwide sales by 6% and grew comp sales across all segments, a testament to our ability to deliver sustainable growth even in a challenging environment. … Read more

Thinking Slow: 3 Research Blind Spots That Changed the Investment World

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Dear members: — Daniel Kahneman in his text Thinking, Fast and Slow (1) divided the human psyche into two systems. The first system is instinctive and emotional, often set on autopilot, while the second system is slower and more logical, requiring a calculating conscious. Many of the maxims the investment world takes for granted today suffer from conclusions that are made rapidly, almost without thinking, driven by our first system, creating what I call research blind spots. — In World War II, Allied bombing raids were suffering from very high casualty rates. It was estimated that for those pilots that were flying at the beginning of the war, only about 10% survived, a terrible loss rate. Bombing was crucial to the Allied … Read more

McDonald’s Returns to Positive Comparable Sales Growth

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Image Source: Valuentum By Brian Nelson, CFA On August 6, McDonald’s (MCD) reported strong second quarter results with both revenue and non-GAAP earnings per share coming in ahead of the consensus forecast. Global comparable sales increased 3.8% (versus 2.5% consensus) with broad-based growth across all segments. U.S. comparable sales growth increased 2.5% in the U.S. (versus 2.3% consensus and a -3.6% mark in the first quarter of this year), while it increased 4% in International Operated Markets (versus 1.8% consensus) and 5.6% in International Developmental Licenses Markets (versus 3.6% consensus). Consolidated revenues increased 5% (4% in constant currencies), while systemwide sales increased 8% (6% in constant currencies). Management had the following to say about the results: Our 6% global Systemwide … Read more

Chipotle Now Expects Flat Comps for 2025

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Image Source: Valuentum By Brian Nelson, CFA On July 23, Chipotle (CMG) reported disappointing second quarter results with non-GAAP earnings per share coming in line with the consensus forecast, but revenue missing what the Street was looking for. Total revenue increased 3% in the quarter thanks to new restaurant openings, but comparable restaurant sales fell 4% due to lower transactions, and its operating margin dropped to 18.2%, down from 19.7% in the prior-year period. The Street had been looking for a 2.9% decline in comp sales in the quarter. Restaurant level operating margins fell to 27.4% from 28.9% in last year’s quarter. Adjusted diluted earnings per share was $0.33 in the quarter, down 2.9% from the second quarter of last … Read more

3 Undervalued Stocks to Consider Buying Now

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Dear readers:   With the markets retracing most of their recent drawdown, we’re taking a victory lap as we didn’t panic, nor should have you. We highlighted our wait-and-see approach amidst the worst of the pullback, and we expect the Magnificent 7 (large cap growth and big cap tech) to continue to propel the markets higher, as they have done.   We’ve been busy rolling valuation models as we finetune our assumptions for a great number of companies under coverage. While doing so, we came across three undervalued stocks that are also included in the simulated newsletter portfolios. We think they’re prime for highlight.   The three stocks are UnitedHealth Group (UNH), Nvidia (NVDA) and Alphabet (GOOG). We spend a lot of time on discounted cash-flow valuation, … Read more

Magnificent 7 Earnings Reports Not Bad Thus Far

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By Brian Nelson, CFA   Shortly after Trump’s Liberation Day, where the President unveiled lofty tariffs on numerous countries, we released our wait-and-see outlook for the equity markets, which thus far has proven to be the right move, with the markets largely recovering from the depths reached in April. The S&P 500 (SPY), for example, is down just 3.3% year-to-date, excluding dividends.   A lot has happened since Liberation Day, including easing of tariffs to a 10% baseline for most, if not all, countries, with the key exception of China, where tariffs remain extremely elevated and prohibitive. Many countries are now reportedly negotiating trade agreements with the White House, and we expect China to be added to that list soon, even if … Read more

Trump Tariffs Higher than Expected; What We’re Doing

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By Brian Nelson, CFA The Trump tariff increases came in larger than what we were expecting, and it remains to be seen how they will flow through the global economy, as we monitor potential retaliatory tariffs from other countries. As it relates to the equity markets, we’re taking a wait and see approach at the moment as we monitor new policy changes related to trade, immigration, fiscal (tax), and regulations. In short, we’re not overreacting to the sell off as we won’t have a great handle on the tariff impact to companies for a few quarters when they report results post-tariff increases. That said, we’re expecting continued market volatility, with meaningful risk to the downside, before trade uncertainty alleviates in … Read more

Alert: Changes to the Newsletter Portfolios

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Image Source: Mike Cohen cc by 2.0. Summary Best Ideas Newsletter portfolio Pepsi (PEP): 4%-6% à 0% McDonald’s (MCD): 4%-6% à 0% Amazon (AMZN): 0% à 4%-6% Nvidia (NVDA): 0% à 4%-6% Dividend Growth Newsletter portfolio Honeywell (HON): 3%-4% à 0% McDonald’s (MCD): 3%-4% à 0% Meta Platforms (META): 0% à 3%-4% Booking Holdings (BKNG): 0% à 3%-4% By Brian Nelson, CFA 2024 proved to be a great year for stock investors. The Dow Jones Industrial Average ETF Trust (DIA) has advanced nearly 15% year-to-date on a price-only basis, while the SPDR S&P 500 ETF Trust (SPY) is up a whopping 25%+ on a price-only basis. The Invesco QQQ Trust (QQQ) is up even more at a 27% advance in … Read more

In the News: Newmont, McDonald’s, the Election

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By Brian Nelson, CFA Newmont’s Costs Balloon in the Wake of Higher Gold Prices, Roughly Flat Production Expected in 2025 Newmont (NEM) reported lower than expected third quarter results October 23, with revenue and non-GAAP earnings per share missing the consensus forecast. Revenue advanced 84.7% in the quarter, while non-GAAP earnings per share came in at $0.81. We liked the revenue growth in the quarter, propelled by an average realized gold price of $2,518, but all-in sustaining costs (per ounce) also increased to $1,611, up materially from $1,426 recorded in the same period a year ago. Newmont, nonetheless, generated operating cash flow of $1.64 billion and free cash flow of $760 million in the quarter, up materially from the third … Read more

An Important Measure of Leverage for Dividend-Growth and Income-Oriented Shareholders, One That Is Dividend-Adjusted

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As more and more investors rely on company dividends for income, dividends, in our view, have become more debt-like commitments in nature, especially from the perspective of dividend-growth or income-oriented shareholders. Years ago, we rolled out a measure of financial leverage that considers both the company’s debt and the present value of its future expected cash dividend obligations, which, in the eyes of die-hard dividend-growth or income-oriented shareholders, may be implicitly assumed to be debt-like commitments in substance. We think this leverage ratio can be used in conjunction with the Dividend Cushion ratio to gain additional insight into the dividend-paying financial health of an entity. Note: There is often great confusion with respect to published measures of financial leverage, and … Read more