Weekly Notes On Restaurant Industry: McDonald’s & Dunkin’ Brands

According to the USDA (United States Department of Agriculture), the forecast for total meat production in the year 2015 has been raised due to increased beef and pork production. Moreover, the forecast for 2015 beef imports to the U.S. has been increased. ^[1] The beef production estimates for the year 2015 is 23.8 billion pounds, down 1.7% from the 2014’s beef production. However, the production forecast for pork, red meat, and poultry is higher than 2014’s figures. On the other hand, the prices of butter, cheese, and milk is expected to be lower in 2015 compared to 2014’s high prices. Beef prices rose by over 42% between April and September last year, before declining by nearly 12% in the last 3 months of 2014.

On the other hand, the restaurant industry in the U.S. is witnessing stiff competition among the fast food chains for customer traffic during the breakfast daytime. With fast casual restaurant leading the race, all the quick service restaurants (QSR) are revamping their menu by introducing innovative menu items and by expanding their beverage portfolio.

Here’s a quick round up of the restaurant companies covered by Trefis.

McDonald’s

On January 23, McDonald’s Corporation (NYSE:MCD) released its annual report for the fiscal 2014. The company reported a 1% year-over-year (y-o-y) decline in comparable sales, due to a major decline in customer traffic. As a result, the company’s net revenues declined 2% y-o-y. Due to the China meat scandal in August, as well as weak performance in the U.S., the company’s operating income for the fiscal 2014 year declined 9% y-o-y.  McDonald’s reported a diluted EPS of $4.82, down 13% y-o-y. ^[2] As a result, McDonald’s CEO Don Thompson stepped down from his position and a company veteran Steve Easterbrook will be taking over as the new CEO of the company.

McDonald’s stock rose from $89 to $93 during the latter half of the last week. Our price estimate for the company’s stock is $96 (market cap of $94 billion) which is roughly 3% above the current market price.

See Our Complete Analysis For McDonald’s Corporation

Dunkin’ Brands

Dunkin’ Brands is scheduled to release its annual report for the fiscal 2014 on February 5 2015. Last month, the company announced new and updated performance guidance, where the company provided additional performance expectations for fiscal year 2015.  In the report, the company mentioned that its earnings growth expectation for 2015 is below its long-term targets. As a result of disappointing performance targets, the company’s stock declined nearly 10% from $46.22 to $42. The company expects Dunkin’ Donuts U.S. comparable sales growth to be in the range 1-3%, down from the 2-4% expected guidance mentioned during the Investor and Analyst Day. Moreover, the company expects Dunkin’ Donuts U.S. to add 410-440 net new restaurants and Baskin-Robbins U.S. to add 5-10 new outlets in 2015. The long-term revenue growth targets for the company were lowered from the 6-8% range to 5-7%. ^[3]

Dunkin’ Brands’ stock traded between the range of $45 and $47 during the last week. Our price estimate for the company’s stock is $43 (market cap of $4.5 billion), which is nearly 8% below the current market price.

See full analysis for Dunkin’ Brands

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More Trefis Research

1. USDA WASDE report, January 12, 2015 [↩]
2. McDonald’s Q4 2014 earnings call transcript [↩]
3. Dunkin’ Brand announces fiscal year 2015 performance expectations [↩]