MCD

Previewing Yum! Brands’ Fourth Quarter Results

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Yum! Brands (YUM), the owner of KFC, Pizza Hut, and Taco Bell, will report its fourth-quarter results after the market close Monday. The quick-service restaurant giant is a global powerhouse with solid brands and strong cash-flow generating capacity. Yum! Brands has generated cash flow from operations of $1 billion or more in each of the past 10 years, with the firm pulling in more than $2 billion in each of the past two years. The company’s greatest growth opportunity resides with its KFC brand in China. Per one million people, there are just 3 KFC units in China. In other Asian countries, this ratio is closer to 20 to 1, implying significant long-term expansion in the country. China’s consumer class … Read more

Starbucks’ Investors Are Forgetting That Coffee Costs Can Go Back Up; Shares Lack Valuation Support

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Starbucks (SBUX) has one of the strongest and most-recognized brands in the world. We think its brand name is largely responsible for it being able to charge lofty prices on its coffees and drinks, despite significant competition in each of its markets. Starbucks’ fiscal first-quarter results (ending December 29, 2013) reminded us of this solid position, which appears to be nearing impregnability given the strong pace of traffic trends and profit improvements. The coffee giant announced Thursday that it experienced 12% revenue growth during its fiscal first quarter thanks to strong holiday sales and solid store traffic, which drove quarterly revenue to a record $4.2 billion. Even though prices for its beverages are set at premium levels, the firm is … 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

Tweeting on Thursday

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Thursday was jam-packed with news. Let’s jump to an abbreviated ‘Valuentum Take’ on each major news item in the spirit of Twitter’s (TWTR) 140 character limit. We don’t intend to do this too frequently, but we wanted to get our take out there in a timely fashion. We’re available for any questions. Tweeting on Thursday AK Steel $AKS issues strong outlook, but #steel industry far from attractive, among the worst in our coverage. Tibco $TIBX issues poor outlook, while Red Hat $RHT exceeds expectations, puts up strong billings growth; both firms fairly valued. Linn Energy $LINE back on track as SEC endorsement improves sentiment; we prefer $KMP and $ETP in DG portfolio. Darden $DRI to part with Red Lobster; core … Read more

Has the Time for Robots Finally Arrived?

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The 1980s were filled with ideas that robots would take over our personal lives. There was, of course, The Terminator, which ingrained a sense of fear within society about the potential dangers of advanced robotic use. But there were other “friendlier” movies, too. Who could forget the beloved ‘Johnny 5’ in Short Circuit or Paulie’s robot “girlfriend” in the fourth installment of the Rocky series? Unlike depicting a robotic assassin from a post-apocalyptic future, these movies showed the humanization of robots with feelings like fear and love. Are we now re-living a bout of 1980s nostalgia, with Amazon (AMZN) and UPS (UPS) recently talking about unmanned flying drones delivering packages to consumers’ door steps? It’s probably not too far of … 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

McDonald’s Underwhelms in 3Q; Outlook Not Mighty

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On Monday, McDonald’s (MCD) posted third-quarter results that left much to be desired. Global comparable sales barely moved higher at 0.9%, while consolidated operating income advanced a modest 6%. Diluted earnings per share increased at a similar pace to $1.52 per share, but the disappointment was certainly from the top line. Comparable stores in the US increased just 0.7% in the third quarter thanks to the popular Monopoly promotion and the new Mighty Wings. We thought the latter would have had a greater impact given the significant recent marketing promotions. Comparable sales in Europe jumped 0.2% thanks to strong performance in the UK and Russia, partially offset by weakness in Germany. Same-store sales in the Asia/Pacific, Middle East and Africa … Read more

An IPO That Doesn’t Look Delicious: Potbelly

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After the extremely positive post-IPO fortune of fast food concept Noodles & Co (NDLS), the surging IPO of Potbelly (PBPB) caught our attention. Let’s take a look at the prospects of this Chicago-based sandwich chain. Background Potbelly is a Chicago-based sandwich chain famous for its toasted sub sandwiches, fresh milkshakes, and in-store musical entertainment. The concept began in Chicago’s Lincoln Park neighborhood as a toasted sub shop with eclectic decorations from the original owner’s antique shop. Current chairman and largest individual shareholder Bryant Keil purchased the original restaurant in 1996 and has since worked to turn it into a chain with 286 restaurants throughout the United States—280 owned by the company, and 6 owned by franchisees. The firm also has … Read more

Will Chipotle Serve Breakfast?

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Amid news about the lack of Fed tapering and the launch of Apple’s iPhone 5S (click ticker for report: ), news broke that fast food chain Chipotle (click ticker for report: ) was testing coffee products at one of its Washington, D.C. locations. Naturally, the question arises: is Chipotle going to serve breakfast? Why We Think It’s a Great Idea There’s little doubt that the consistent comparable same-store sales growth from the likes of Panera (click ticker for report: ), Chipotle, and Noodles & Co. (NDLS) suggests that meals eaten outside of the house continue to rise. At the moment, we’re comfortable saying that McDonald’s (click ticker for report: ) possesses the strongest breakfast offering with a mix of inexpensive … Read more