Mickey-D's was among those stocks which disappointed investors
this earnings week. During the second quarter,
) net income increased 3.7% to $1.4 billion. Worldwide sales at
the company's restaurants operating for at least a year increased
1%, in keeping with analysts' expectations.
However, earnings per share came in at $1.38, lower than the
Zacks Consensus Estimate by 1.4%. Additionally, same-restaurant
sales in the U.S. for the second quarter increased 1%, lower than
the average analysts' estimate of a gain of 1.5%. The company
also said same-store restaurant sales worldwide would remain
unchanged for the month of July.
Reasons for the Decline
McDonald's has already suffered from slowing global sales.
Same-restaurant sales in Europe declined 0.1% during the quarter.
Disappointing numbers from Europe, particularly France, and a
lower guest count were the primary reasons. This, in turn, was
probably a result of austerity measures.
Same-restaurant sales for the Asia/Pacific, Middle East and
Africa (AMPEA) region also slipped 0.3%. For the U.S., sales did
increase by 1%, but this was lower than the year-ago figure of
Big Mac's Response
The increase in domestic sales was a result of several
initiatives. The iconic brand's consumers now have a variety of
options to choose from on a menu which has undergone several
changes. Additionally, widely publicized lower priced meals and
late night breakfasts have also led to a rise in footfalls.
But the company may be facing an even stiffer battle ahead.
Smaller competitors with widely differentiated offerings as well
as limited time deals are continuing to beat this iconic brand at
its own game.
4 Other Choices
First up we have one of McDonald's direct competitors
Burger King Worldwide, Inc.
). Currently, the company is in the process of converting its
business model into once in which is completely franchisee based.
It's innovative 'BKDelivers' program will also boost business.
This initiative is designed to deliver directly to homes, schools
and offices. It will definitely improve the company's presence
and increase same-store sales going forward.
Burger King holds a Zacks Rank #1 (Strong Buy) and has expected
earnings growth of 15.70%. The forward price-to-earnings Ratios
(P/E) for the current financial year (F1) is 23.57.
Jack in the Box
Next up we have
Jack in the Box Inc.
). This may seem to be a slightly risky choice at first glance
because of the continuous decline in traffic due to macro
concerns. However, the company has undertaken a rigorous
operational and financial review of its Qdoba Mexican
restaurants. It has decided to close 67 underperforming Qdoba
restaurants by the end of fiscal 2013.
However, such a measure is expected to improve cash flow.
Besides, the company is also opening 70 to 75 new restaurants and
it seems such measures will result in a turnaround. Currently
JACK holds a Zacks Rank #1 (Strong Buy) and has expected earnings
growth of 17.12%. It has a P/E (F1) of 23.84.
Our third choice is
Cracker Barrel Old Country Store, Inc.
). It has also delivered returns in excess of 60% over the last
year and has been paying out handsome dividends. The company has
also raised the lower bound of its comparable sales growth
guidance from 2% to 2.5% for fiscal 2013.
CBRL delivered strong third quarter earnings for 2013 in June.
Revenues grew 5.2%, primarily due to higher traffic and growth in
comparable same store sales.
Besides a Zacks Rank #1 (Strong Buy), the company has expected
earnings growth of 10.83%. It has a P/E (F1) of 19.78.
Krispy Kreme Doughnuts
BURGER KING WWD (BKW): Free Stock Analysis
CRACKER BARREL (CBRL): Free Stock Analysis
JACK IN THE BOX (JACK): Free Stock Analysis
KRISPY KREME (KKD): Free Stock Analysis
MCDONALDS CORP (MCD): Free Stock Analysis
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With a dedicated fan base for its iconic product, the Original
Krispy Kreme Doughnuts, Inc.
) is our fourth choice. The company was one of the great
turnaround stories in recent times. Widely expected to post
double-digit earnings in 2014, the company recently revealed that
it has refinanced its secured credit facilities.
KKD also said it had retired all of the outstanding balance of
its term loan. It has also started a new share repurchase
program. At $50 million, this is much higher than the $20 million
program which ended in 2012. The company also has a Zacks Rank #1
(Strong Buy), with expected earnings growth of 29.30% and a P/E
(F1) of 31.60.
On the whole, food and beverage stocks seem to be good bets at
this point. You could do worse than adding these four to your