"Many U.S. companies are getting a lift from strong overseas business, and McDonald's (NYSE: MCD) is no exception," says Richard Moroney, noting that overeas same-store sales are growing at roughly twice the rate seen at U.S. outlets.
"That's not to say that the firm's domestic business is stale," he adds in Dow Theory Forecasts. Indeed, he notes that the company has reported 51 consecutive months of same-store-sales growth and has been beefing up its U.S. stores with new menu items and longer operating hours.
Moroney explains, "McDonald's should continue to benefit from the ongoing rollout of new menu items, including premium salads, snack wraps, and breakfast items." The company, he notes, has been extending operating hours at some restaurants and said it wants all of its U.S. restaurants to open by 5 a.m. by 2009 to capture more of the growing fast food breakfast market.
Another key to McDonald's success, he contends, has been its willingness to shed operations and outlets that are underperforming or diverting resources from core operations. To that end, the firm sold its remaining interest in Chipotle Mexican Grill (NYSE: CMG)and agreed to sell its Boston Market chain.
In April, Moroney observes, McDonald's announced it was selling its existing businesses in 18 countries in Latin America and the Caribbean to a developmental licensee organization that will result in the franchising of nearly 1,600 restaurants.
The move, he points out, will allow McDonald's to receive royalty income from the franchises in a challenging market without having to commit significant amounts of capital.
Says the advisor, "McDonald's is expected to open 800 company-owned stores, and close about 350, in 2007, with about half of the new stores in Asia. China represents a strong growth opportunity for the company because of the country's growing middle class and increasing rate of car ownership. McDonald's opened its first drive-through restaurant in China in 2005 and plans to operate 120 by 2008."
McDonald's spent about $5 billion on dividends and stock buybacks in 2006 and said it plans to spend at least $5.7 billion on dividends and share repurchases in 2007 and 2008, he explains. Further, Moroney notes, the company has raised the dividend every year since its first payout 30 years ago.
The advisor rates MCD as a 'Focus List Buy' and a 'Long-Term Buy,' the newsletters highest designations, adding that the stock has held up "especially well" during the market's recent correction.
Each day, Steven Halpern's TheStockAdvisors.com features the latest investment ideas and market commentary from the financial newsletter community.
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Reader Comments (Page 1 of 1)
8-28-2007 @ 3:31PM
Brian Patterson said...
My son got e coli 0157 H:7 from eating a McDonalds meal in August 2002. He was on morphine for 7 days. Both McDonalds and Zurich Ins. denied liability yet the CDC National PulseNet database found isolated and random PFGE matches. My advice to anyone is to save their reciepts and a uneaten portion of their meal for further testing, confirmation and proof of purchase.
8-29-2007 @ 5:37PM
Jim said...
I have been eating at McDonalds for more than 40 years. I have never gotten sick at ANY McDonalds, nor do I know of anyone who has. I'm sorry Brian Patterson's son got sick, but he is the exception to a very strong record of consistent quality and food safety.
9-06-2007 @ 9:29AM
Brian Patterson said...
In response to Jim, the CDC found geographical isolated and random PFGE matches. The CDC does not sound an alarm unless there is a cluster of two or more illnesses within the same geographical area. Therefore, MCD escaped public notice.
Jim, in all due respect, the style and sophistication of your blog sounds and reads like your an employee of MCD's.