McDonald's (NYSE: MCD) announced its same-store sales results for the month of April Thursday, and the data indicate a healthy fast-food business ("healthy fast food" -- isn't that an oxymoron?).
Global comps as a whole increased 5%. Comps for European locations increased 6.3%, and the Asia/Pacific/Middle East/Africa segment saw a 7.8% rise in same-store sales. McDonald's restaurants in the States increased an anemic 2%. The weak domestic sales really need to be addressed so that they can pull more weight and add to the cool story that is McDonald's.
The stock has been a pretty decent performer over the last several months, rising over 6% over the three-month timeframe, and over the one-month period, it is up over 7%. And the longer-period returns from the past are even more impressive. Imagine how McDonald's stock would perform if management figured out how to get people to visit the U.S.'s Golden Arches more often. I suppose April's performance should be praised since March saw a decline in U.S. comps, as this article makes plain, but that depreciation was the first one in five years, and that says to me that McDonald's needs to be careful.
It's all about the marketing, of course. There are a lot of choices out there -- Burger King (NYSE: BKC), Wendy's (NYSE: WEN) and Yum! Brands (NYSE: YUM) -- so I think promotion of the brand is key. Some will disagree and say that menus and pricing are the big drivers -- they are important, don't get me wrong, but perhaps McDonald's needs to take a cue from Burger King and its campaign with the creepy-king thing -- those commercials are clever. Still, if this comps reports says anything, it says that you shouldn't count the clown out -- McDonald's is a blue-chip stock that is near a 52-week high, and not only is it a great long-term/core holding, but it's also quite possibly an interesting shorter-term idea as well.
Disclosure: I don't own shares in any company mentioned here; positions can change at any time.
Most annoying ads? The wing man series by Pizza Hut is a recent annoyance, but Domino's still, in my mind, has not lived down the ignominy of its Noid commercials in the 1980s.
Most obscene side-dishes? What in the hell are dipping strips? Like we don't realize they're just pizza dough with goo indistinguishable from the plaque clogging our arteries. Bad Pizza Hut! Bad!
Size? Pizza Hut -- 12,800 outlets in 90 countries. Domino's -- 8,624 outlets in 55 countries.
This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.
Ahhhh... Kentucky Fried Chicken from the Colonel. Then it became KFC. Now it's Kentucky Fried Chicken again. Any way you slice it, they have some awfully good chicken and the most delicious gravy ever. Please don't tell me how many calories I'm eating or whether I'm next on the heart attack list thanks to all the fat.
Kentucky Fried Chicken is one of multiple restaurants under the Yum! Brands (NYSE: YUM) umbrella, which also includes Pizza Hut, Taco Bell, and Long John Silver's. The menu has changed a bit over the years, but the mainstay of KFC will always be the chicken dinners. You can currently get your chicken in original or extra crispy. Or you can choose the more modern chicken strips or popcorn chicken.
Popeye's Chicken, owned by AFC Enterprises (NASDAQ: AFCE), refers to itself as "New Orleans Chicken." With over 1,900 stores open at the end of 2007, Popeye's provides a little more variety in addition to the standard chicken meals. Of particular interest are the "Louisiana Legends," which include Creole, Jambalaya, Etoufee, and Smothered Chicken.
For a true chicken experience, I think KFC is the way to go. But if you prefer to spice it up and get a little New Orleans style food with your chicken, Popeye's is your brand of choice!
Vote in our poll for KFC or Popeye's as your preferred brand, and let us know in the comments why you love it.
McDonald's (NYSE: MCD) may be the big brand name in the fast-food industry, but don't discount Burger King (NYSE: BKC). The King reported its fiscal Q3 numbers on Thursday, and they were pretty regal indeed.
Revenues increased 10%, and earnings per share did even better, rising 20% to 30 cents (that beat earnings by three pennies, says Briefing.com). Now, when talking about retail stores and fast-food joints, the issue of same-store sales always comes up, since it's such an important element to consider (be sure to keep in mind that comps must always be put in an overall context, especially if you are only measuring a one-month timeframe). Global comps increased 5.8% for the quarter, a good showing for Burger King which wants to become a force to be reckoned with around the world. The domestic side of things isn't doing too badly either as comps in the United States and Canada moved up 5.4%. Restaurant margins, however, decreased due to the challenging commodity-cost environment we all live in nowadays. Otherwise, I see these earnings as very positive for Burger King, and I am bullish on the stock.
YUM reported Q1 revenues of $2.41 billion versus consensus estimates of $2.35 billion.
Stifel Nicolaus says: "China continues to prove it's the crown jewel in the YUM business portfolio."
YUM call option volume of 1,924 contracts compares to put volume of 4,242 contracts. YUM May option implied volatility of 27 is below its 26-week average of 33 according to Track Data, suggesting decreasing movement.
Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Yum! Brands (NYSE: YUM) reported Q1 numbers Tuesday after the bell, and the company came through with double-digit growth on the bottom line. Net sales increased 8%, and earnings per share, adjusted for special items, increased 19% to $0.42.
There's a lot of cool stuff in this report that shareholders will view in a positive light. The international story for Yum! is a good one, with operating profit for this part of the company increasing 18%. China continues to be a strong territory for the KFC, Taco Bell, and Pizza Hut brands -- as many have pointed out, Yum! is a great way to gain exposure to this market. And how about this -- management saw fit to buy back shares of the company to the tune of almost a billion bucks! That says something to shareholders, as does the increased guidance. Granted, Yum! upped the per-share expectation by only a couple of pennies to $1.87 (excluding items), but that's still the right direction, isn't it? Also, according to Briefing.com, the company beat Wall Street's expectations by two cents.
Yum!, which competes with McDonald's (NYSE: MCD), Burger King (NYSE: BKC), Wendy's (NYSE: WEN), and all manner of neighborhood eateries, needs to continue the good fight on the home front. It reversed a negative same-store sales trend this past quarter, but management must not rest on this nice stat -- Yum! must explore better marketing campaigns and branding tactics to keep the comps headed higher. Yum!'s stock is not far from a 52-week high, but I'm currently bullish on its prospects.
Disclosure: I own none of the companies mentioned here; positions can change at any time.
"The Olympics have long been a boon to stock markets of host countries," notes Tony Sagami, a leading global stock advisor with a noted specialty in Asian markets.
In his Asia Stock Alert newsletter, he notes, "I believe the chief beneficiaries of the Olympic Games will be consumer and travel-related stocks. And within these sectors, I've chosen six stocks poised to bring home Olympic gold from Beijing."
"We saw a 19% gain in the Spanish stock market in the 12 months before the 1992 Barcelona Olympics, and the 27% gain in the Greek stock market in the year before the 2004 Athens Olympics. And those countries were not growing at a fraction of the breakneck pace that China is. So it wouldn't surprise me to see the Chinese stock market do even better.
"It seems like every person I see in China has a cell phone glued to their ear. And the cell phone is not just the primary voice communication medium in China; it is also the common way most Chinese access the Internet and email. In China, the cell phone 'is' the personal computer.
"Heck, most new high-rise condominium and apartment complexes being built in China aren't even wired for land lines. Once you understand the device's role, you'll see why China Mobile has more cell phone users (360 million) than the U.S. has people. I expect a lot of cell phone calls and text messages during the Beijing Olympics!
Market pullbacks and periods of protracted economic sluggishness are not the most calming circumstances, but they do create buying opportunities, and with the above in mind, Yum! Brands is worth an evaluation.
Yum! Brands (NYSE: YUM) operates the world's largest fast food operation network, including signature chains Kentucky Fried Chicken, Pizza Hut, Taco Bell, and Long John Silver's.
Analysts like YUM restaurant opening timetable, with 1,000 net new restaurants expected to open annually, with impressive international restaurant growth. Operating costs are reasonable, and margins are solid.
Further, China operations may see a 20-30% earnings growth in 2008. Overall 2008 earnings are likely to grow 10-12%. Moreover, in what may become a new chain concept or a variation of an existing format, YUM is experimenting with grilled chicken at its KFC restaurants. The Reuters F2008/F2009 EPS consensus estimates for YUM are $1.87/$2.11.
The risks? Analysts are keeping an eye on YUM's food ingredient costs, and marketing expenses.
The First Call mean rating for YUM is: Hold. [14 firms.] Mean 2008 target: $40.00. [high: $43, low: $37.]
Stock Analysis: Yum! Brands is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from YUM's shares. Sell / Stop Loss if you were to purchase shares in this company: $27.
Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.
MOST NOTEWORTHY: Analog Semiconductors, OrthoVita and First Solar were today's noteworthy initiations:
Morgan Stanley initiated Analog Semiconductors with an In Line rating. The firm assumed National Semiconductor Corp (NYSE: NSM) with an Overweight rating and $26 target and is the firm's top pick; Analog Devices (NYSE: ADI) and Linear Tech (NASDAQ: LLTC) were initiated with Equal Weight ratings and a $32 target and $34 target, respectively.
Barrington believes OrthoVita (NASDAQ: VITA) is the market share and technological leader of the biomaterials market. The firm assumed shares with an Outperform rating and $4 target.
Canaccord Adams believes First Solar's (NASDAQ: FSLR) management and business model are among the best of any PV company and that execution has led to strong profitability plus a successful aggressive capacity ramp. Shares were started with a Buy rating and $325 target.
OTHER INITIATIONS:
Morgan Stanley initiated Yum! Brands (NYSE: YUM) and Domino's Pizza (NYSE: DPZ) with Equal Weight ratings and targets of $40 and $15, and also initiated McDonald's (NYSE: MCD) and Burger King (NYSE: BKC) with Overweight ratings and targets of $65 and $34.
Lehman initiated Alcoa (NYSE: AA) with an Overweight rating and $44 target.
MOST NOTEWORTHY: Genentech, ESS Technology and SemGroup Energy were today's noteworthy upgrades:
Rodman & Renshaw upgraded Genentech (NYSE: DNA) to Outperform from Market Perform citing the FDA's approval of Avastin in mBC.
Jefferies raised ESS Technology (NASDAQ: ESST) to Hold from Underperform to reflect the offer from Imperium Partners.
Citigroup upgraded shares of SemGroup Energy (NASDAQ: SGLP) to Buy from Hold on valuation, as they believe the significant accretion expected from the partnership's recent asphalt terminal acquisition is not priced into the stock.
OTHER UPGRADES:
Yum! Brands (NYSE: YUM) was raised to Buy from Neutral at UBS.
RBC Capital upgraded Juniper (NASDAQ: JNPR) to Outperform from Sector Perform.
Goldman raised its rating on BJ Services (NYSE: BJS) to Neutral from Sell.
General Motors (NYSE: GM) was downgraded by Deutsche Securities from Buy to Hold. Shares are down nearly 2% in premarket trading.
YUM! Brands (NYSE: YUM) was upgraded by UBS from Neutral to Buy.
Genetech (NYSE: DNA) was upgraded by Rodman & Renshaw from Market Perform to Market Outperform with a $90 target price. Friedman Billings, with its Market Perform rating on DNA, upped the target price on the stock from $67 to $76. Shares are up over 8% on FDA approval of Avastin as breast cancer treatment drug.
Motorola (NYSE: MOT) was downgraded by Oppenheimer from Outperform to Perform.
Continuing to show its status as a growing cultural icon, the Apple (NASDAQ: AAPL) iPhone made an appearance in last night's Academy Awards, as did the Nintendo Wii.
Calyon Securities says: "To leverage its extensive local infrastructure capabilities and broaden its business base in China, YUM is rolling out a new Chinese food format in China: East Dawning."
YUM option implied volatility of 36 is above its 26-week average of 33 according to Track Data, suggesting larger movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
This post is part of our 
This post is part of our 
McDonald's
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YUM! Brands
Yum! Brands
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