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

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Upside
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Trefis
MCD: McDonald's logo
MCD
McDonald's

According to the National Restaurant Association’s latest report released on April 30, the Restaurant Performance index dropped 40 basis points in the month of March as many U.S. restaurant operators witnessed a slowdown in customer traffic. However, restaurant operators have a positive outlook on their business conditions for the coming few months. The wholesale food pricing index on a year-to-date (YTD) basis was up 1.4%, menu pricing index was up 3%, and the grocery index was up 2.7%. However, some commodities were above this index, such as beef whose pricing index was up 19% YTD, and some commodities, especially dairy products, were below the index. Many analysts are expecting beef prices to remain elevated throughout 2015. This might force the companies to raise their menu prices.

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

McDonald’s

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After a poor first quarter earnings report, McDonald’s Corporation (NYSE:MCD) is taking rigorous steps to improve customer trust in its Asian markets. In the first quarter, McDonald’s consolidated revenues declined 11% year-over-year (y-o-y) to $5.9 billion whereas operating income declined 28% y-o-y to $1.38 billion. [1] On May 4, the company announced a new turnaround plan, according to which McDonald’s will operate under a new organizational structure from July 1. [2] Later that week, the company reported 0.6% year-over-year decline in global comparable sales for April, with the U.S. and Asian markets reporting declines in comparable sales of 2.3% and 3.8%, respectively. [3]

McDonald’s stock rose from $96 to $100 during the first half of the month and dropped back to $96 during the last week. Our price estimate for the company’s stock is $101 (market cap of $97 billion), which is roughly 5% above the current market price.

See Our Complete Analysis For McDonald’s Corporation

Dunkin’ Brands

Dunkin’ Brands (NASDAQ:DNKN) reported relatively impressive figures in its first quarter earnings report for fiscal 2015 on April 23. Dunkin’ Donuts U.S. reported comparable store sales growth of 2.7%, whereas Baskin-Robbins U.S. reported 8% growth in comparable store sales. [4] Moreover, Dunkin’ Brands, along with J.M Smucker Company (NYSE:SJM), expanded its partnership with Keurig Green Mountain (NASDAQ:GMCR) by signing agreements for manufacturing, marketing, distribution, and sale of Dunkin’ K-Cup packs in the U.S. and Canada. [5]

Dunkin’ Brands’ stock traded between $50 and $54 during the month of May. Our price estimate for the company’s stock is $53.74 (market cap of $5.2 billion), which is roughly the same as the current market price.

See full analysis for Dunkin’ Brands

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Notes:
  1. McDonald’s Q1 2015, earnings call transcript []
  2. McDonald’s announces initial steps in turnaround plan including worldwide business restructuring and financial updates []
  3. McDonald’s reports global comparable sales for April []
  4. Dunkin’ Brands Q1 2015, earnings call transcript []
  5. Dunkin’ Brands, The J.M. Smucker Company and Keurig expand partnership to make Dunkin’ K-Cup packs available at retail outlets nationwide and online []