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

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MCD: McDonald's logo
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McDonald's

According to Black Box Intelligence, a financial performance research group for the restaurant industry in the U.S., restaurants showed improved performance in the month of January, as their increasing momentum in the last couple of months strengthened. Relatively mild weather conditions, cheaper gas and a stable economic environment in the U.S. are being considered as the reasons behind the increased sales and traffic. Customer count was up 2.4% year-over-year (y-o-y) in January, whereas the comparable store sales in the Midwest region was up to 11.2% owing to favorable weather conditions. Overall restaurant comparable sales growth was 6.1%, a 3 percentage point improvement compared to December’s sales figures. Despite a few winter storms, January’s average sales per restaurant increased by 2.5% over the December figures. [1]

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

McDonald’s

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After a disappointing performance in the fiscal 2014, McDonald’s Corporation (NYSE:MCD) recently released its January comparable store sales report, where the company reported a 0.4% year-over-year (y-o-y) improvement in U.S. comparable sales, driven by the above mentioned factors. [2] However, the company’s Asian segment still continues to struggle with a 12.6% decline in the comparable store sales. On the other hand, the company’s stock announced its dividend record date as March 2, as a result of which the stock price jumped 5% from $94 to $99. Furthermore, the company’s new CEO, Steve Easterbrook, will be taking over the position on March 1.

McDonald’s stock rose sharply from $94 to $99 during the last week. Our price estimate for the company’s stock is $96 (market cap of $94 billion) which is roughly 3% below the current market price.

See Our Complete Analysis For McDonald’s Corporation

Restaurant Brands International

Restaurant Brands International Inc (TSX/NYSE:QSR), the parent company of the two iconic brands: Tim Hortons (THI) and Burger King(NYSE:BKW), released its full year and fourth quarter 2014 fiscal results. The company’s  net revenues for the quarter rose 56% y-o-y to $416 million, including the Tim Hortons’ contribution to the revenue stream from the transaction date of December 12, 2014. However, Burger King’s revenues for the quarter alone were $274 million, up merely 3.3% y-o-y. [3] In 2014, the key highlights were the company’s successful launching of joint ventures in Europe and its entry into India. Burger King’s joint ventures in South Africa and France are off to a good start too, as the customers liked the new menu offerings and popular burger items.

The company’s stock rose from $41.50 to $43.50 during the last week. We are currently in the process of incorporating Tim Hortons operations and revamping the structure for the company. After the release of the report, QSR stock jumped more than 10% from $39 to $43.

See full analysis for Burger King

Dunkin’ Brands

Dunkin’ Brands released mixed results in its fourth quarter earnings report, as its Dunkin’ Donuts U.S. segment’s comparable store sales increased just 1.4%, and that of Baskin-Robbins U.S. grew by 9.3%. [4] The highlights of the company’s performance in 2014 were: strong growth of both brands in the U.S., the increase in number of transactions despite the economic headwinds, the launch of the DD Perks Loyalty program, and the international expansion and developments in countries, such as Sweden, Austria, and China. On January 8, Dunkin’ Brands announced its intent to expand Dunkin’ Donuts in China. The company has signed a long-term franchise agreement with Golden Cup Pte. Ltd, as wholly owned subsidiary of RRJ Capital Master Fund II, which will serve as the franchise partners to open and operate nearly 1,400 Dunkin’ Donuts stores in the country. [5]

Dunkin’ Brands’ stock traded between  $46 to $48 during the last week. Our price estimate for the company’s stock is $43 (market cap of $4.5 billion), which is 9% below the current market price.

See full analysis for Dunkin’ Brands

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Notes:
  1. Rising sales trends accelerated by mild winter weather & improving economy []
  2. McDonald’s reports global comparable sales for January []
  3. Restaurant Brands International earnings conference call []
  4. Dunkin’ Brands Q4 2014 earnings call transcript []
  5. Dunkin’ Donuts announces expansion plans in China with signing of largest development agreement in company history []