The Zacks Analyst Blog Highlights: McDonald's, Starbucks, Wingstop and Noodles & Company

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For Immediate Release

Chicago, IL - October 21, 2015 - announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the McDonald's Corp. ( MCD ), Starbucks Corporation ( SBUX ), Wingstop Inc. ( WING ) and Noodles & Company ( NDLS ).

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Here are highlights from Tuesday's Analyst Blog:

Will China Issues Impact McDonalds' Q3 Earnings?

One of the leading hamburger chains, McDonald's Corp. ( MCD ) is set to report third-quarter 2015 results on Oct 22, 2015. Last quarter, the company posted a positive earnings surprise of 2.44%. Meanwhile, the company has posted positive earnings surprises in all the trailing four quarters with an average positive earnings surprise of 4.96%. Let's see what's in store this season.

Factors to Consider

The company has been posting sluggish comps over the past few quarters due to negative guest traffic in all its major segments. The food safety issue in China in Jul 2014 has been a major deterrent to the company's sales. Although the restaurant chain expects to post positive comps in the third quarter, driven by International Lead Markets and its recovery from the 2014 APMEA supplier issue in China, a drastic turnaround is unlikely due to the slowdown in the Chinese economy. Also, negative currency translation is expected to hurt profits in the soon-to-be reported quarter as has been the case over the past few quarters.

However, the company has taken a number of initiatives to reinvigorate sales. From trimming complicated menus to speeding up service to testing customized burgers and sandwiches to competing with other popular restaurants, the company is leaving no stone unturned to regain consumer confidence at all its key operating regions. McDonald's is also working on a digital strategy and mobile technologies to further lower costs. These initiatives would aid comps as well as profits in the third quarter. We would like to remind investors that comps in the second quarter at all its key regions had improved compared to the first quarter.

On the cost front, the company expects margins to remain under pressure in the second half of 2015 due to the implementation of wage increases as well as offering of paid time-off for employees at company-operated restaurants and educational assistance for all restaurant employees beginning Jul 1, 2015. Apart from minimum wage increases, additional health care costs related to 'Obamacare' are a negative for the company's margins. Further, commodity costs especially that of beef and costs associated with brand positioning in the U.S. would continue to weigh on margins.

Earnings Whispers?

Our proven model does not conclusively show that McDonald's is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP : The company's Earnings ESP stands at +1.59%. This is because the Most Accurate estimate is $1.28, while the Zacks Consensus Estimate is pegged at $1.26.

Zacks Rank #4 (Sell) : We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies in the restaurant industry that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Starbucks Corporation ( SBUX ) has an Earnings ESP of +2.33% and a Zacks Rank #2 (Buy).

Wingstop Inc. ( WING ) has an Earnings ESP of +11.11% and a Zacks Rank #2.

Noodles & Company ( NDLS ) has an Earnings ESP of +14.29% and a Zacks Rank #3 (Hold).

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MCDONALDS CORP (MCD): Free Stock Analysis Report

STARBUCKS CORP (SBUX): Free Stock Analysis Report

WINGSTOP INC (WING): Free Stock Analysis Report

NOODLES & CO (NDLS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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