Research archive for MCD

McDonald's is selling more Quarter Pounders than ever, because the company stopped selling frozen patties and moved to using fresh meat. According to the company, sales were up 30% year-on-year since the switch, allowing them to compete with never-frozen rivals like In-N-Out, Smashburger, and Wendy's.

McDonald's is a stock that we used to own. We sold it. The chief, Steve Easterbrook (new), delivered a 23 minute message to stakeholders, franchise owners and employees (stakeholders, medium rare) in presenting the turnaround plan yesterday. If you are interested in watching, here goes: McDonald's turnaround plan. The crowd did not roar with excitement, the stock was a noticeable loser on the day. The long and the short of it all is that you would not need to present a plan if the current one was not working. McDonald's has been a loser on the technology front (Easterbrook cites a lack of innovation as a reason they have lagged).

Equally feeling the heat was McDonald's, some of the lower profits attributed to both Russia and Ukraine, equally the US experiencing a fall off in sales. Again, the stock trades on a 16.5 multiple, which is not cheap for a company that just delivered a global comparative sale DECREASE of 3.3 percent -> McDonald's Reports Third Quarter 2014 Results. See that annual dividend of 3.40 Dollars?

It's been a tough week for McDonald's following the meat scandal in China which Sasha covered on Monday and then they released a disappointing set of second quarter results yesterday. Global comparable sales were flat, revenues were up 1%, operating income was flat and diluted earnings per share increased 1% on the back of share buybacks. This equated to $1.39bn or $1.40 a share. This is still a big and profitable business even though there is not much growth.

Yesterday we received same store sales from McDonald's which again disappointed. Same store sales have been flat for the past 1-2 years as various macro and micro factors had their influences. Lets first look at the numbers then we can chat about the company as an investment.

McDonald's reported same store sales numbers yesterday, that were somewhat of a surprise for the market, but many remain unconvinced. Here is the release: Global Comparable Sales Increase 1.2% In January. At the same time, the company announced that they were opening their first store in Vietnam, in Ho Chi Minh City. Bringing their total Asian, African and Middle East footprint to 10000. Kind of ironic that McDonald's founder Ray Kroc is associated with American success and capitalism and Ho Chi Minh was the first president of communist, single party Vietnam. Ironic, don't you think. Although Wiki tells me that Ho Chi Minh actually worked for General Motors in the US as a young man, or at least he claimed that. He did work as a baker at Boston based Omni Parker House, a famous hotel and monument. Ho Chi Minh worked all over in many different countries, before finally leading his countrymen to independence. Perhaps the place will be renamed Saigon, we will see.

Companies time! This time it is one of the best known brands on the planet, McDonald's, synonymous with cheap and lightning quick delivery of food, fast in every sense of the way. I wonder if the fifth consecutive quarter of disappointing sales has something to do with the economic downturn and then the subsequent upturn again. When times are tough, diners look for a cheaper alternative will flock to something they know. McDonald's performed really well from a sales point of view through the financial crisis, but has had a very tough last 18 months.

It is a company that serves 69 million customers daily in over 34 thousand restaurants in 118 countries (obviously around the world). The company provides jobs for 1.8 million people globally, third only in a commercial sense to WalMart and China Railway Engineering corp. The Chinese Army and the US Defense dept employ more people than those commercial ventures. It is a company that opens 28 new restaurants a week around the world. You guessed it, McDonald's, who reported numbers on Monday that I guess failed to impress Mr. Market. Year to date sales are only two percent higher, net income is up 3 percent, whilst EPS is up 5 percent. Earnings per share for the quarter were 6 percent better (7 excluding the currency translation) at 1.52 Dollars. One cent negative currency translation for the quarter, three cents so far this year!

MacMiss. Not a supersized miss, but a miss over the seas and far away might as well be any size. Supersize, downsize, less in size. The actual quarterly miss was 2 cents earnings, the currency translation was exactly 2 cents, but I would think that the analyst community knows well enough about the currency ebbs and flows of a multinational business like McDonald's. 69 million people are serviced in 34 thousand restaurants across 118 countries each and every day. And more than 80 percent of all the McDonald's globally are owned and managed by franchise owners. So essentially these folks are their own bosses, but of course have to pay royalties to the parent company or to the super franchise owner. As per the company profile on the McDonald's website 59 percent of the stores are conventional franchises, whilst 21 percent are licensed to "foreign affiliates or developmental licensees". The balance, one in five stores, are owned by the company.

One of our most widely held US company holdings is McDonald's. Possibly one of the most recognisable brands across the world, seventh on last years Forbes list, behind Apple, Microsoft, Coca-Cola, IBM, Google and Intel. All powerful names in their own right. McDonald's operates 34 thousand outlets around the world, managing one in five of those, creating employment for hundreds of thousands of people that serve nearly 70 million people daily. That is amazing, because that means that McDonald's will basically serve the population of the planet every 101 days or so. 25.2 billion people served a year.

Although Apple stole the limelight one of our other recommended stocks released fourth quarter and full year results yesterday, namely McDonald's. For the quarter EPS came in at $1.38 which was above consensus of $1.33 while December same store sales were flat. Asia which is obviously a big growth region has stalled dramatically largely due to the big chicken scare they had a few months ago. It has had a larger impact on KFC but during what has already been a tough time for fast food restaurants in the region, McDonald's also felt the pain.

McDonalds has 33 500 restaurants serving 62 million people a day in 119 countries. They sell 75 hamburgers every second, have a workforce of 1 million people in the US alone and are the biggest toy distributor in the world. The McDonalds sign is globally recognized by their golden arches, they look to open a restaurant a day in China over the next three years and even the queen of England owns one in her property portfolio.

Mr. Market was certainly not lovin' it, when it came to the McDonald's numbers on Friday. That jingle might be simple, but it certainly sticks. The currency had quite a big impact, and earnings were dampened by as much as a 8 cents per share. But a miss is a miss, the stock sold off aggressively Friday, down 4.46 percent to 88.72 Dollars. The stock is down over five percent in the last month.

The one that we were most focussed on was McDonald's, which reported decent enough numbers, but missed expectations.

McDonald's released same store sales that really flunked, they were not bad, but for Mr. Market all he/she wants to see is that it beats expectations. And this it did not. We wondered for a little bit whether or not the stories about people starting to "eat up" in value was partly to blame for these numbers coming in with a weaker showing. Here is a quick screen grab from their press release -> McDonald's Global Comparable Sales Rise 3.3% In April.