MCD

McDonald’s Modest Dividend Growth

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Wednesday afternoon, global fast food giant McDonald’s (click ticker for report: ) announced that it will increase its quarterly cash dividend 5% to $0.81 per share—an annual run-rate of $3.24 per share. This is in-line with our prediction that McDonald’s next dividend increase would be 5% to $3.24 per annum (see dividend report ). Interestingly, this will be the second consecutive year that McDonald’s increased its dividend at a single-digit pace. Why is the dividend growth so depressed? McDonald’s only grew revenue 2% year-over-year during its most recent quarter while earnings per share were 5% higher than the year-ago period. McDonald’s is relatively conservative in terms of capital allocation, so we aren’t surprised the company has opted to increase its … Read more

Biglari Wants to Create More Value at Cracker Barrel

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Country-style restaurant and retailer Cracker Barrel (click ticker for report: ) posted decent fourth-quarter results Wednesday morning that were overshadowed by a wide guidance range and a letter from its largest shareholder, Sardar Biglari. With the firm lapping a 53-week fiscal year, total revenue declined 4% year-over-year to $674 million, modestly exceeding consensus expectations. Earnings per share, adjusted to reflect comparable time periods, increased 19% year-over-year to $1.43. For the full-year, the firm earned $4.90 per share, an increase of 11%. Cracker Barrel generated roughly $135 million in free cash flow, equal to 5% of total revenue. Comps are Modest Source: Company Filings, Valuentum Biglari Wants a Big Dividend Sardar Biglari, CEO of Biglari Holdings (BH), which is Cracker Barrel’s … Read more

Is Innovation Back at McDonald’s?

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Tuesday morning, the world’s largest fast food company, McDonald’s (click ticker for report: ), posted weak August comparable sales results overshadowed by the potential for menu innovation. Aggregate same-store sales grew 1.9% year-over-year on top of a 3.7% gain during the same period during 2012. August Sales August sales at McDonald’s were volatile across geographies. US same-store sales grew just 0.2% year-over-year during August, which CEO Don Thompson blamed on a “challenging environment.” Interestingly, Thompson addressed the challenging environment, which we agree with, rather than blaming a bad economy, which has so often been the case. In fact, we think an improving economy may leave McDonald’s at a disadvantage as consumers trade-up and no longer demand as much value. The … 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

Soft Sales Growth at McDonald’s Is No Surprise

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Fast food heavyweight McDonald’s (click ticker for report: ) reported an uneventful second quarter Monday morning. Revenue increased 2% year-over-year to $7.1 billion, in-line with consensus estimates. Earnings per share fell a few cents short of consensus estimates, growing 5% year-over-year to $1.38 per share. CEO Don Thompson tends to cite the macroeconomic environment as the main driver of persistent weakness at McDonald’s. This argument certainly holds weight in Europe, in our view, but we do not believe the soft 1% same-store sales growth rate in the US was macro-related. Rather, we think the company’s premium product offerings aren’t packing the same punch as new products did in previous years. McDonald’s performed relatively well during the Great Recession thanks to … Read more

Weak Volume Growth Weighs on Coca-Cola

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Leading soft drink maker Coca-Cola (click ticker for report: ) posted lackluster second quarter results Tuesday morning. Revenue declined 3% (+2% excluding currency) year-over-year to $12.8 billion, falling short of consensus estimates. Comparable earnings per share (a non-GAAP figure) increased 4% year-over-year to $0.63, in-line with consensus expectations. With lower capital expenditures than in the year prior, free cash flow is roughly flat year-to-date at $2.8 billion, approximately 12% of revenue. Image Source: Coca-Cola Eurasia and Africa outperformed the rest of the company as volumes surged 9% year-over-year, annualizing 10% expansion in the same period a year ago. Currency headwinds weighed on net revenue growth, which totaled 5% (11% excluding currency). The markets in Eurasia and Africa have consumption rates … Read more

Weakness at Yum! Extends Beyond China

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Global fast food player Yum! Brands (click ticker for report: ), owner of KFC, Taco Bell, and Pizza Hut, reported weak second quarter results Wednesday afternoon as the Chinese poultry scandal and an outbreak of avian flu weighed on the firm’s sales in China. The company’s revenue fell short of consensus expectations, declining 8% year-over-year to $2.9 billion. Earnings-per-share was even weaker, falling 16% year-over-year to $0.56 per share on an adjusted basis—slightly above consensus estimates. Year-to-date, free cash flow has totaled $257 million or 18% of revenue—a relatively strong number, in our view. The most obvious problem at Yum! Brands remains its China division, specifically KFC. If a tainted poultry scandal weren’t enough, the outbreak of avian flu in … Read more

After Midnight Breakfast at McDonald’s: Is the Company out of Tricks?

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Late yesterday night, fast food goliath McDonald’s (click ticker for report: ) confirmed that it is experimenting with an “after midnight” breakfast menu. Let’s emphasize the after midnight aspect, which specifically means that the firm won’t be serving all-day breakfast. Such a move to all-day breakfast would be expensive, and, in our view, a sure sign the firm was out of ideas. The moves to bolster its product offering in the late night segment has logic behind it—look no further than the popularity of breakfast diners at 2-5am on Saturday and Sunday mornings. For years, Taco Bell (click ticker for report: ) has been perceived as the go-to fast food destination after midnight, at least in part due to its … Read more

McDonald’s Struggles In The First Quarter

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Fast-food goliath McDonald’s (click ticker for report: ) posted first-quarter results that revealed a great deal of weakness in its core business. Revenue rose 1% year-over-year to $6.6 billion, a tad higher than consensus expectations. Earnings per share were roughly in-line with consensus estimates, rising only 2% year-over-year to $1.26 per share. More worrisome, McDonald’s same-store sales declined 1% year-over-year driven by a 1.2% decrease in same-store sales in the United States. Operating income in the region declined 3%. The firm released a few new items like Fish McBites and premium wraps, but new products were unable to push the needle in terms of sales. McDonald’s emphasized its continued focus on value and the dollar menu, which, in our view, … Read more

McCormick Kicks Off 2013 With Strong Cash Flow

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Spices and flavor giant McCormick (click ticker for report: ) started fiscal year 2013 with a solid first quarter. Revenue increased 3% year-over-year to $934 million, easily exceeding consensus estimates. Earnings per share rose 4% year-over-year to $0.57 per share, in-line with consensus expectations. We were pleased to see a strong surge in operating cash flow, which jumped 39% year-over-year to $32 million. McCormick’s first quarter showed a remarkable divergence between its consumer and industrial businesses. The consumer business segment saw sales jump 7% driven by a 14% sales increase in emerging markets, as well as continued strength in the US and Europe. We think McCormick’s spices provide consumers with a relatively inexpensive way to improve tastes, which is important to … Read more