For Immediate Release
Chicago, IL - Feb 1, 2018 - Zacks Equity Research highlights McDonald's Corp. MCD as the Bull of the Day, TravelCenters of America TA as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Alphabet Inc. GOOGL .
Here is a synopsis of all three stocks:
Bull of the Day :
Iconic fast food chain McDonald's Corp. has been a staple in the restaurant industry soon after its founding in 1955. By concentrating on a limited menu-burgers, fries, and beverages-and focusing on quality and effectiveness, the company managed to sell its 100 millionth hamburger just three years later in 1958.
From there, The Golden Arches expanded to 119 countries around the world. The menu, however, has gotten much more complex, and varies depending on location and region. Plus, we can all agree that the McDonald's breakfast menu, and its decision to make that an all-day option, was one of their all-time best business decisions, ever (#BlessTheMcGriddle).
The company is in the middle of a significant turnaround effort, and the Zacks #1 (Strong Buy) stock has experienced a strong rally since 2015. As its valuation has risen, investors and analysts have come to expect certain results from McDonald's, which is why its most recent quarter came as a little bit of a shock.
Mixed Fourth Quarter Results
For any other restaurant company, these results would have been stellar. But for McDonald's, they were not reflective of the company's previous performance.
Adjusted earnings of $1.71 were strong, surpassing the Zacks Consensus and improving 19% year-over-year.
Sales, though, was where MCD struggled, and saw a decline due to its overall strategic refranchising initiative. Revenues at company-operated restaurants fell 26.8%, though revenues at franchise-operated restaurants increased 12.2%.
Global comps grew 5.5%, while U.S. comparable sales and international lead markets increased 4.5% and 6%, respectively.
Shares of McDonald's experienced their biggest intraday drop after the report was released, and even though it matched Street estimates for U.S. comps, analysts have become so used to seeing the company exceed in this category that this slowdown was certainly a surprise.
Earnings growth estimates have been steadily increasing, however, and analysts are still quite bullish on MCD.
For its current quarter, earnings are expected to grow almost 9%, and five analysts revised their estimates upwards in the last 30 days compared to none lower.
Fiscal 2018 figures are also looking quite promising, with eight estimates moving higher in the past month. The consensus estimate trend has seen a boost for this time frame, increasing from $6.97 per share to $7.26 per share.
Earnings estimates for 2019 are on the rise as well, jumping from $7.48 per share to $7.81 per share in the last 30 days.
Can the Rally Continue?
Despite its fourth-quarter hiccup, we have to remember that MCD stock has been on a very strong run these past couple of years, growing nearly 40% over the past one year and gaining almost 80% in the past five years.
Bear of the Day :
If you've ever taken a road trip in the U.S., there's a good chance that you've come across a TravelCenters of America travel center. The company is a full-center national travel center chain, with nationwide locations that serve hundreds of thousands of professional drivers, including virtually all major trucking fleets, and other highway travelers each month.
The company operates under the TravelCenters of America, TA, and Petro brand names, and offer diesel and gasoline fueling services, restaurants, heavy truck repair facilities, stores, and other services.
Third Quarter 2017 Results
Last quarter was not one of TravelCenters' best.
The Zacks Rank #5 (Strong Sell) stock posted earnings of 8 cents per share that came in well below the Zacks Consensus of 22 cents per share, representing a negative surprise of 63.6%.
Total revenues of $1.58 billion also missed the Zacks Consensus of $1.62 billion.
In its Travel Centers segment, though, both of TA's fuel and nonfuel revenues increased, which resulted in an increase in total revenues of $101.5 million, or 8.2%.
For its Convenience Store segment, fuel revenues increased by $10.4 million thanks to increases in market prices for fuel, but nonfuel revenues decreased mostly due tp a result of the mix of products and services sold.
At the time of this report's release, TA was involved in a litigation case with financial solutions company Comdata, and fees and expenses involving this matter impacted its Q3 results.
TA tentatively reports Q4 results on Feb. 27.
Earnings growth estimates have kind of been all over the place for TA.
For its current quarter, just one analyst has revised their estimate upwards in the last 30 days. The Zacks Consensus Trend has also moved higher, from $-0.07 to $-0.05, in the past 30 days.
TA's current year estimate trend has moved marginally higher, from $0.70 to $0.71, but compared to the prior year period, earnings are expected to surge over 1,500%.
However, looking at next fiscal year, one analyst cut their estimate downwards in the last 30 days, and the estimate trend has gone from flat to a loss of a penny per share for the period. Earnings are expected to decline over 100% for this fiscal year.
Will Shares Be Able to Rebound?
Shares of TravelCenters are down almost 40% within the past one year.
3 Key Estimates for Google's Q4 Earnings
Shares of Google parent Alphabet Inc. opened nearly 0.5% higher on Wednesday as investors gear up for the company's fourth-quarter earnings announcement tomorrow afternoon. Google is often considered a bellwether for the entire technology sector, so investors will definitely want to pay close attention to this upcoming report.
A shift to mobile computing once threatened Google's traditional search business, management has successfully adapted to changing consumer trends by expanding its operations into nearly every corner of the modern tech world.
Today, Google and the other subsidiaries under the Alphabet umbrella sit on the cusp of dominance in several booming industries, including cloud computing, mobile payments, ecommerce, and artificial intelligence. Of course, search is still the company's bread and butter, but there's plenty more to be excited about if you're an Alphabet investor right now.
Heading into Alphabet's report date, our current consensus estimates are calling for the company to post adjusted earnings of $10.12 per share and revenues of $25.67 billion. These results would represent year-over-year growth of 8% and 30%, respectively.
Key Report Items
But of course, earnings and revenue are just two of the many things investors will be looking at when Alphabet reports on Thursday. In fact, it is possible that the company's post-earnings momentum is inspired by its performance in key business segments.
To prepare for this, we can turn to our exclusive non-financial metrics consensus estimate file. The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.
Based on our current consensus estimates, we expect Google's advertising revenues to come in at $26.935 billion for the quarter, which would represent growth of about 20.3% from the year-ago period. Last quarter, advertising revenues grew about 21.4% to touch $24.065 billion.
But Alphabet's most exciting growth catalyst is its "Google other revenues" category. This unit includes revenues from the company's Google Play Store, as well as its Google Cloud offerings and hardware initiatives.
Our consensus estimate file is calling for Google other revenues to hit $4.613 billion, up about 35.6% from the year-ago quarter. In the previous quarter, Google other revenues expanded more than 39.9% to reach $3.405 billion. If Alphabet can post a positive surprise in this category, it will likely be because of strong holiday sales from things like Google Home and the Pixel.
Finally, investors should also expect to see impressive growth in Alphabet's mysterious "Other Bets" unit. The company uses this segment to lump together its smaller projects, and for the most part, these projects don't generate much revenue.
But some of the Other Bets subsidiaries-including Google Fiber, Nest, and Verily-are adding to Alphabet's top line. According to our consensus estimates, Other Bets revenues are expected to come in at $362 million, which would represent growth of 38.2% year-over-year. Last quarter, Other Bets revenues soared 53.3% to touch $302 million.
Make sure to check back here for our full analysis of Alphabet's actual results tomorrow!
Want more analysis from this author? Make sure to follow @ Ryan_McQueeney on Twitter!
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About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Alphabet Inc. (GOOGL): Free Stock Analysis Report TravelCenters of America LLC (TA): Free Stock Analysis Report McDonald's Corporation (MCD): Free Stock Analysis Report To read this article on Zacks.com click here.