MCD

McDonald’s Menu Items and Value Proposition Drive Same-Store-Sales Growth; We’re Raising Our Fair Value

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On Friday, McDonald’s (MCD) reported first-quarter results that were yet again superb, reaffirming the company’s position as the premier restaurant in the fast-food space. Due to the excellent operating results and upward revisions in our earnings projections in the out-years, we are raising our fair value to $95 per share, with $114 per share now being the high end of our fair value range. << Our 16-page Equity Report on McDonald’s (MCD) — login required McDonald’s drove global same store sales growth of 7.1% compared to the same quarter a year ago, highlighted by an 8.9% increase in same store sales in the US. By any measure, McDonald’s is about as saturated as possible in the US, but new products such … Read more

McDonald’s Transition Could Provide an Entry Point for Dividend Growth Investors

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Last week, McDonald’s (MCD) CEO Jim Skinner announced that he will be retiring from the company on June 30, 2012, after more than four decades on the job. His replacement will be current chief operating officer and President Don Thompson. Skinner led McDonald’s during its post “Supersize Me” revival and has done a tremendous job integrating new products (McCafe comes to mind), re-modeling dreary stores and increasing both earnings and revenue. His rise from assistant store manager to CEO without a college degree seems nearly impossible to replicate, and his understanding of the day-to-day business and McDonald’s customer is unparalleled.That being said, Don Thompson is no slouch either. He started his career at McDonald’s 22 years ago, and has quickly … Read more

And…It’s Another Great Year for McDonald’s But the Shares Look Fairly Valued

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Earlier this week, McDonald’s (MCD) reported an excellent fourth quarter and very strong year. With earnings and revenue in-line with our estimates, we’re sticking with our $88 per share fair value estimate. Earnings for the year grew 15% to $5.27 a share, while same store sales accelerated to a 5.6% pace compared to last year. However, we were most surprised by the performance in Europe—same store sales grew by 7.3% in the fourth quarter, even as the Eurozone deals with a fiscal crisis and a possible recession. We think this highlights the outstanding value proposition McDonald’s offers customers in spite of challenging economic conditions. Margins did fall slightly in the quarter, and though we do not see much room for improvement in the mid-term, operating … Read more

McDonald’s Third Quarter Was Solid

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Another quarter is in the books for McDonald’s (MCD), and the company has posted yet another blowout quarter. McDonald’s continues to execute well on all fronts. After reassessing our short-term assumptions, we think the firm is fairly valued in the high-$80s per share. Earnings per share surged 12% to $1.45, which blew past every estimate on the street. Margins came in higher than expected, as commodity prices fell off a cliff during the quarter, and incremental revenue gains were much higher than expected. However, with the company hedged, they were unable to experience the full extent of these cost savings. Also on the income side, McDonald’s continues to roll out new drink offerings in all of its markets, which drive not only new traffic, … Read more

Ignore Debt Ceiling News, Focus on Corporate Earnings

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Simply put, the United States is not going to default on its debt. In other words, we think any market action resulting from the debt-ceiling issue will be irrelevant in coming months, and resolve itself in due time — as it has with any other crisis. Further, we remain unconvinced that this topic is a legitimate concern for long-term equity investors. The fact that America has a large national debt (and a problem with entitlement programs) is well documented in every history and social-studies textbook in grammar schools across the country; how can this be something that will blindside the markets? We’re not talking about derivatives on complex mortgage instruments here. The debt-ceiling deadline is purely a political issue, one … Read more

Quarter Too Good to Ignore, Raising Our Estimated Fair Value of McDonald’s

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Quarter too good to ignore…we’re raising our fair value of McDonald’s. At Valuentum, we focus on the long-term intrinsic value of a company via a discounted cash-flow valuation process. That means building an extensive model for each company, and updating it when material events occur that may change our opinion. McDonald’s second quarter results were very impressive, outpacing consensus as well as our estimates. As such, we have revisited our valuation and are raising our fair value estimate. We now forecast stronger top-line growth and better operating margins, the combination of which results in our current $87 per share fair value estimate.  Top-line and bottom-line surprised us. We originally thought forecasting top-line growth in the double-digits might be a little bullish, given lackluster same-store-sales numbers earlier in the quarter. However, in its second quarter, McDonald’s posted revenue … Read more

Closely Watching McDonald’s for an Entry Point

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This article appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/280998-closely-watching-mcdonalds-for-an-entry-point We like McDonald’s (MCD): The Golden Arches’ future looks as bright as its past.There’s little need for us to explain to investors the story behind McDonald’s. At the end of 2011, McDonald’s will have over 33,500 restaurant locations nationwide, and total sales (including franchisees, which don’t count for McDonald’s Corp.) will likely exceed $100 billion. We think a discounted-cash flow method is the most effective way to determine the intrinsic value of a company in order to determine what investors should pay for shares. In the spirit of the transparency of our process, we make our discounted cash-flow valuation model template, which can be used to value any operating (non-financial) company, … Read more