YUM

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

Poultry Problems Plague Yum!

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Fast food giant Yum! Brands (click ticker for report: ) announced solid fourth quarter results Monday afternoon, though the company warned investors that problems lie ahead. Revenue during the fourth quarter increased 1% (5% on a comparable basis) to $4.2 billion, in line with consensus estimates. Earnings were slightly better than expected, growing 10% year-over-year on an adjusted basis to $0.83 per share during the period. For the full year, YUM! earned $3.25 per share—better than the firm anticipated. However, these results were completely overshadowed by incredibly negative news coming out of China. Not only did same-store sales fall 6% year-over-year, with operating margins declining 190 basis points to 13.9%, but the company is experiencing a terrible reaction to a … Read more

Growth Slowing at Chipotle

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Fast-growing restaurant chain Chipotle (click ticker for report: ) announced its preliminary fourth-quarter results ahead of its presentation at the ICR Conference. Productivity growth at the restaurant appears to be slowing, as same-store sales climbed just 3.8% year-over-year. Overall revenue growth remains strong, up 17% year-over-year to $699 million, slightly above consensus estimates. However, earnings look incredibly disappointing, as the firm estimates earnings per share of $1.92-$1.97—well below the consensus estimate of $2.09 and only a small increase from the same period a year ago. According to the firm’s press release, food costs jumped 130 basis points to 33.5% of sales—the main culprit behind restaurant operating margins dropping 150 basis points compared to the same period a year ago. Though … Read more

Is Tiffany Still Sparkling?

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Luxury retailer Tiffany (click ticker for report: ) reported challenging holiday sales Thursday. Global sales growth came in at 4% ($992 million)–the low end of the firm’s previous guidance range–after sales really slumped in North America. Same-store sales at the Tiffany 5th Avenue flagship store in New York and stores throughout North America declined 2% during the holiday period. Internet and catalog sales in the region did increase 4%, leading total sales in the Americas region to increase 2% on a constant currency basis (and 3% on a reported basis to $516 million). This could be a negative for other stores such as Saks (click ticker for report: ) that are so heavily tied to New York flagships, but we … 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

Is McDonald’s Back on Track?

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Monday morning, fast food behemoth McDonald’s (click ticker for report: ) announced stronger than anticipated same-store sales growth for the month of November. Same-store sales jumped 2.4% year-over-year at a company-wide level, easily exceeding the consensus estimate of 0.4% growth. We continue to remain on the sidelines for now, though we think the company would make a compelling addition to the portfolio of our Dividend Growth Newsletter at the right price (below the low end of our fair value range). US same-store sales increased 2.5% year-over-year, with the company citing breakfast, new items like the Cheddar Bacon Onion, and value offerings as the main drivers. Given the price point of the new sandwich and products, we believe it was the … Read more

McDonald’s Falling Prey to Competition

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Fast-food giant McDonald’s (click ticker for report: ) reported weak October same-store sales numbers Thursday. CEO Don Thompson continues to invite criticism as sales and profits have begun to fall since taking the reins from legendary CEO Jim Skinner. Global same-store sales fell 1.8% year-over-year, while global sales fell 0.8% (+0.6% ex-currency). Weakness was broad-based, with US same-store sales falling 2.2% year-over-year, Europe falling 2.2%, and Asia-Pacific, Middle East and Africa falling 2.4%. While we think Europe can be explained by overwhelmingly negative macroeconomic sentiment and lower price-points, we think the US is more of a company-specific issue. Competition in the US market was fairly dormant for the past several years, with Wendy’s (click ticker for report: ) and Burger … Read more

McDonald’s Sales Growth Looks Anemic in the Third Quarter

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Fast-food chain McDonald’s (click ticker for report: ) reported mediocre third quarter results Friday morning. Revenue growth was weak, coming in flat year-over-year, though up 4% on a currency-neutral basis, in-line with expectations. Earnings fell 1% year-over-year to $1.43 per share, a few cents lower than consensus estimates. Weakness was broad-based, with aggregate same-store sales growing only 1.9%. The weakest geographic region was surprisingly the US, where same-store sales grew only 1.2% year-over-year. The firm has tried to move away from its value offerings to grab margin dollars as input costs soar, but the change hasn’t been effective. Still, management expects the McRib and the introduction of the Cheddar Bacon Onion to drive incremental growth in the US during the … Read more