I'm Loving It: McDonalds Sales Increase

Mark is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

McDonald's (NYSE: MCD) just announced that same store sales increased by 2.4% last month. The results at stores open at least 13 months included a 2.5% gain in the U.S., 1.4% in Europe, and 0.6% in Asia.

In October, for the first time in many years, monthly same store sales actually declined. 

Recently, in an effort to reverse the slowdown, McDonald's announced a change in their advertising policy emphasizing the lower-cost dollar meals instead of the extra value offerings.

The November numbers indicate that the new strategy seemed to pay off. However, will it continue to be effective down the road? Of course only time will tell. One potential headwind is that overall consumer spending in the U.S. has been decreasing, and this could hurt future sales here. 

McDonald's has taken a beating and shares have fallen by over 10% YTD. Over the past three years the stock has still managed a 13% average annual gain. The Big Mac maker pays a nice dividend of $3.08 a share, which yields 3.5% at the current price. 

How do McDonalds' results compare?

Chipotle Mexican Grill (NYSE: CMG) reported a slight gain in sales but experienced a stock price decline too. Although revenues increased by 9% the shares have dropped by 35%. McDonald's was a major investor in the company from 1998 to 2006. 

A high price valuation in relation to earnings may have contributed to the sell off, which started in April. The P/E was in the mid-50's but has since declined to about 31. More reasonable, but still could be a bit too high based upon indications of slowing EPS growth. 

Yum! Brands (NYSE: YUM), which operates Taco Bell, Kentucky Fried Chicken, and Pizza Hut, has been growing revenue at a faster pace than most of its competitors. However, the stock price has decreased, down 5% for the year.

The company's valuation is not stratospheric; it has a P/E of 19, and earnings have been fairly consistent over the long term, but it has bounced around a bit this year. EPS growth is expected to slow down to less than half of its current rate. This could keep a lid on the price.

The stock has a dividend yield of 2% based upon the payout of $1.34 per share. 

Wendy's (NASDAQ: WEN) revenue has increased about 2% for the year, but profits have dropped like a rock and they recently missed earnings estimates. The stock has languished, declining by 5% so far this year.

The company issued guidance that suggested improved performance going forward, citing the recent opening of several new stores. Most analysts agree, projecting future EPS growth of more than 10% per year. 

Wendy's pays a dividend of $0.16 per share and yields 3.4%. 

Dunkin Brands (NASDAQ: DNKN) reported a big revenue gain earlier this year. Earnings are also up: quarterly EPS increased 24% and TTM EPS increased 13%. The stock is up 26% for the year so far. 

Consensus estimates are for both revenue and earnings growth to continue as the company opens more stores and offers more products. However, after the recent run up in the stock price it may be overvalued. The trailing P/E is 44, about double its peers. 

So for at least for the short term, McDonald's seems to have turned the corner on sales. The company is poised to resume its upward trajectory as long as the world economy continues to expand. I'm lovin' it. 


Mathman6577 owns shares of McDonald's. The Motley Fool owns shares of Chipotle Mexican Grill and McDonald's. Motley Fool newsletter services recommend Chipotle Mexican Grill and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus