MCD

Sonic Posts a Solid Second Quarter

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Fast-food restaurant Sonic (click ticker for report: ) reported solid second quarter results Monday afternoon. Revenue fell 3% year-over-year to $111 million as the company lapped a leap year in the same period of last year, putting the number in-line with consensus estimates. Nevertheless, earnings increased 67% year-over-year to $0.05 per share, which was also in-line with consensus expectations. For the quarter, same-store sales (excluding the extra day) jumped 1.3% year-over-year on a systemwide basis, but rose 3.3% at company owned locations. Divergence between company-owned and franchise-owned restaurants is not uncommon, and this continued gap could continue for a variety of reasons, including the owner’s skill level and promotional execution. Regardless, the results were relatively strong, suggesting the company could be … Read more

The Quick-Serve Restaurant Space Could Be Poised for a Rebound

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Wendy’s Every time we look at the restaurant space, we are surprised to see at how small Wendy’s (click ticker for report: ) market capitalization is. Shares have been stuck in neutral for the past year, even though we think the company is in a much better competitive position. Unlike McDonald’s (click ticker for report: ), which has distinctly made itself the preeminent value chain, Wendy’s has mostly held the line on pricing. Wendy’s “Right Price, Right Size” menu has helped, but overall the company has lost traffic. If economic conditions improve, we think Wendy’s could be a beneficiary versus its peers because it has maintained its quality reputation. While the levels of price differences in the burger space (Wendy’s/McDonald’s/Burger … Read more

Yum!’s China Recovery Begins

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After warning that same-store sales could decline as much as 25% during the first quarter in the wake of a poultry supplier scandal that shook consumer confidence in China, Yum! (click ticker for report: ) reported a same-store sales decline of 20% in its China division. Same-store sales at KFC dropped 24%, while Pizza Hut’s sales fell just 2%. We gathered that after McDonald’s (click ticker for report: ) results in China were “strong,” KFC might show some signs of stabilization, and that appears to be the case. More importantly, Yum!’s China division reported same-store sales growth in February. Although aggregate same-store sales grew just 2%, same-store sales at Pizza Hut jumped 13%, and same-store sales were flat at KFC … Read more

McDonald’s February Shows Stabilization

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Dividend growth gem McDonald’s (click ticker for report: ) announced decent February results earlier this morning. On a reported basis, global same-store sales dropped 1.5% year-over-year, but when adjusted for a calendar shift, February same-store sales actually increased 1.7% globally. The US continued to be a weak spot, with same-store sales down 3.3% on a reported basis and flat on a comparable basis. This occurred during a month in which the company had several product introductions, but the firm also had to lap an incredibly difficult 11.1% same-store sales growth rate the firm posted in February 2012. We’re not incredibly disappointed in the US, and we will see comparisons get much easier toward the back half of the year. Europe … Read more

Coca-Cola’s Steady Growth Continues

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Warren Buffett holding and dividend growth stalwart Coca-Cola (click ticker for report: ) reported solid fourth-quarter results Tuesday morning. Revenue increased 4% year-over-year to $11.4 billion, a touch below expectations (but this was the result of unfavorable swings in currency). Adjusted earnings rose 15% year-over-year to $0.45 per share, a penny north of consensus estimates. Coca-Cola did a fantastic job controlling expenses, with SG&A declining 120 basis points as a percentage of sales to 37.7%. The company has been laser-focused on delivering cost savings since 2008, and the firm anticipates generating annualized savings of $550-$600 million during the next four years. Such improved operational leverage could lead to the robust earnings expansion that shareholders have become accustomed to during the past … Read more

McDonald’s January Shows Consumers Aren’t Loving It

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Friday morning, fast-food restaurant giant McDonald’s (click ticker for report: ) announced lackluster same-store sales results for the month of January. Global same-store sales fell 1.9%, while total sales increased 0.7% year-over-year. Results showed a fairly significant geographical bias. Same-store sales in the US grew 0.9% year-over-year thanks to the addition of the Grilled Onion Cheddar burger to the dollar menu. Total system-wide sales jumped 1.9% year-over-year, and we think the company will continue to struggle with the competitive landscape in the US. New product innovation such as the Egg Whites McMuffin may boost sales slightly, but we think 2013 could be a struggle. The firm also faces secular headwinds from higher input costs and a shift away from unhealthy … Read more

Chipotle Surges on…Catering?

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After providing investors with weak preliminary results at the ICR Conference in January, Chipotle (click ticker for report: ) announced final fourth quarter results, which were relatively in line with what we saw a month ago. Revenue grew 17% year-over-year to $699 million, in line with consensus expectations and prior guidance. Earnings per share were a penny below expectations, growing 8% year-over-year to $1.95 per share. Same-store sales for the quarter grew 3.8%, also equal to what the company provided us a month ago. Rising input costs continue to hurt profitability, as the cost of food and beverages was 130 basis points higher at 33.5% of revenue. We think the firm could easily cut costs, but its commitment to high-quality … Read more

McDonald’s Beats Estimates

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Fast-food goliath McDonald’s (click ticker for report: ) announced slightly better-than-expected fourth quarter results Wednesday morning. Revenue grew 2% year-over-year to $7 billion, a touch better than consensus expectations. Earnings, which have seen estimates slashed during the past several months, were a few pennies better than anticipated, growing 4% year-over-year to $1.38 per share. We’re not too fixated on the “beat,” but rather the weakness we are seeing at the core business. Global same-store sales increased just 0.1% during the quarter—McDonald’s worst in years! Same-store sales in the US jumped 0.3% year-over-year in the fourth quarter with flat operating income—the top-line was better than the rest of the company, but certainly is not a strong figure. McDonald’s continues to focus on … Read more

McDonald’s Going After the Wing Market

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In a somewhat surprising move, McDonald’s (click ticker for report: ) is following up the chicken McBites with its own iteration of chicken wings. The “Mighty Wings” are currently being rolled out across 500 Chicago area restaurants (one location we visited advertised them, but had yet to receive the raw goods). Although wing prices are high and have been hurting profit expansion at Buffalo Wild Wings (click ticker for report: ), we like the move. Not only does it fulfill the need for the company to diversify its menu offerings, but we also think the new menu item could generate incremental revenue (assuming the wings are differentiated from other McDonald’s chicken offerings). Buffalo Wild Wings, for example, is still experiencing … Read more

Fiscal Cliff Averted; Aerospace Rallying

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After a volatile December, two of our favorite aerospace names, Astronics (click ticker for report: ) and EDAC Technologies (click ticker for report: ), are rallying significantly after a deal was finally reached to avert the fiscal cliff. Precision Castparts (click ticker for report: ), which had steadily moved higher during the fiscal-cliff ordeal thanks to optimism surrounding its planned acquisition of Titanium Metals (TIE), is also seeing strength today. We assumed both profit taking and overblown fears of defense cuts were the culprit behind the increased volatility, and it seems as though that could be the case. We continue to see substantial upside at these firms thanks to the massive, multi-year commercial aerospace backlogs of the large airframe makers. Our Best Ideas portfolio … Read more