This is how McDonald’s stacks up against two dozen restaurant chains

McDonald’s is scheduled to announce third-quarter results Tuesday, and analysts expect the world’s largest restaurant operator to report slowing same-store sales growth. Still, a look at the company’s largest competitors shows it remains near the top of the heap by that measure.

Shares of McDonald’s are down 1% this year (including reinvested dividends), but that disappointing performance needs to be put into perspective — the stock returned 45% in 2017. Here are longer-term returns compared with the Dow Jones Industrial Average DJIA, +0.26% and the S&P 500 Index SPX, -0.04%

Total returns through Oct. 19
3 years 5 years 10 years 15 years
McDonald’s 74% 105% 325% 970%
Dow Jones Industrial Average 59% 86% 273% 282%
S&P 500 Index 45% 76% 265% 263%
Source: FactSet

McDonald’s has been an impressive performer for longer periods.

On The Clock: The craziest thing bought with credit-card points

Analysts polled by FactSet expect McDonald’s to report a 3.7% increase in third-quarter same-store sales, but a 7.9% decline in total sales from a year earlier. Total revenue has been declining as the company re-franchises stores it had been holding directly. This is meant to cut costs and boost earnings. McDonald’s has also reduced its number of regional offices from 22 to 10, which has placed a drag on sales in some areas, according to RBC Capital Markets analyst David Palmer.

In a note to clients on Oct. 15, Palmer said the redesign of the “customer experience,” with new automated-ordering systems, had been “highly disruptive to sales, although that drag has begun to diminish.” He also said the company’s new “$1 $2 $3 Dollar Menu” was continuing to disappoint, there were operational disruptions from the introduction of fresh beef for Quarter Pounders and the economic lift experienced by some restaurant operators wasn’t having as much of a positive effect on the fast-food industry.

But Palmer said a recent “unusual” meeting among (only) McDonald’s franchisees was likely to “prove to be a healthy event in the evolution of a built-to-last brand and franchised organization.”

The following two tables include estimates for comparable-store sales changes (when available), as well as expected changes in total sales and earnings per share for the largest 25 publicly traded restaurant operators headquartered in the U.S. and Canada, based on consensus estimates among analysts polled by FactSet.

Here are estimates for comparable store sale increases for the largest 25 publicly traded restaurant operators headquartered in the U.S. and Canada:

Company Ticker Market value ($mil) Estimated quarterly comparable-store sales growth from year earlier Comparable-store sales growth – previous quarter Quarterly comparable-store sales growth – year earlier Estimated change in quarterly revenue from a year earlier
McDonald’s Corp. MCD, +0.41% $129,939 3.7% 4.0% 6.0% -7.9%
Starbucks Corp. SBUX, +0.03% $79,138 2.4% 1.0% 2.0% 10.3%
Yum! Brands Inc. YUM, -0.47% $28,372 2.0% 1.0% 3.0% -3.9%
Restaurant Brands International Inc. QSR, +0.40% $14,348 1.1% 1.6% 12.4% 15.7%
Darden Restaurants Inc. DRI, -3.04% $13,197 1.9% 3.3% 3.1% 5.1%
Yum China Holdings Inc. YUMC, -3.04% $12,206 -1.0% 1.0% 6.0% 10.0%
Chipotle Mexican Grill Inc. CMG, -0.74% $11,915 5.1% 3.3% 1.0% 9.6%
Domino’s Pizza Inc. DPZ, +0.51% $11,137 7.0% 6.3% N/A 23.1%
Aramark ARMK, -2.40% $9,428 N/A N/A N/A 8.4%
Dunkin’ Brands Group Inc. DNKN, -1.35% $6,082 1.4% 1.3% -0.1% 53.0%
Texas Roadhouse Inc. TXRH, -2.00% $4,729 4.7% 5.7% 4.5% 9.9%
Wendy’s Co. WEN, +0.18% $4,034 1.9% 1.9% 2.0% 31.8%
Cracker Barrel Old Country Store Inc. CBRL, +2.06% $3,805 -0.3% -0.4% 0.2% 1.0%
Cheesecake Factory Inc. CAKE, -1.39% $2,273 2.2% 1.4% -2.3% 5.4%
Dave & Buster’s Entertainment Inc. PLAY, -4.17% $2,229 -0.7% -2.4% -1.3% 10.9%
Jack in the Box Inc. JACK, -2.56% $2,124 1.3% 0.5% -1.0% -48.0%
Wingstop Inc. WING, -0.80% $2,072 3.6% 4.3% 4.1% 46.1%
Bloomin’ Brands Inc. BLMN, -0.56% $1,810 2.3% 2.4% -1.0% 1.7%
Brinker International Inc. EAT, -2.67% $1,799 1.7% 0.6% -3.3% 2.1%
Papa John’s International Inc. PZZA, -1.83% $1,658 -10.6% -6.1% 1.0% -9.4%
Shake Shack Inc. Class A SHAK, -6.44% $1,596 1.0% 1.1% -1.6% 23.6%
Sonic Corp. SONC, +0.09% $1,541 1.5% 2.6% -1.7% -8.8%
Dine Brands Global Inc. DIN, -2.29% $1,500 N/A N/A N/A 26.3%
BJ’s Restaurants Inc. BJRI, -3.12% $1,377 4.4% 5.6% -1.7% 6.3%
MTY Food Group Inc. MTYFF, +1.24% $1,334 -0.1% 0.7% 1.2% 26.7%
Source: FactSet

You can click the tickers for more information about each company, including news, price ratios, charts and financials.

A close look shows that only four companies among the group are expected by analysts to post better comparable sales growth than McDonald’s: Chipotle Mexican Grill CMG, -0.74% Domino’s Pizza DPZ, +0.51% Texas Roadhouse TXRH, -2.00% and BJ’s Restaurants BJRI, -3.12%

The problem with comparisons of quarterly sales estimates to actual sales from a year earlier is that wild swings can be caused by changes in revenue recognition accounting (with Dunkin’ Brands Group DNKN, -1.35% as an example) or asset sales (Jack in the Box JACK, -2.56%) or other types of restructuring. Sell-side analysts provide adjusted figures for prior full years’ sales to FactSet for comparison purposes, but not always, and adjusted quarterly data isn’t available. So be cautious with the total revenue data and dig further if you are interested in any of these companies for investment. Here are estimates for changes in total quarterly revenue and calendar 2018 revenue for the largest 25 publicly traded restaurant operators headquartered in the U.S. and Canada:

Company Ticker Estimated change in quarterly total revenue from year earlier Estimated change in total sales for calendar 2018 from calendar 2017
McDonald’s Corp. MCD, +0.41% -7.9% -8.1%
Starbucks Corp. SBUX, +0.03% 10.3% 9.1%
Yum! Brands Inc. YUM, -0.47% -3.9% -2.9%
Restaurant Brands International Inc. QSR, +0.40% 15.7% 18.3%
Darden Restaurants Inc. DRI, -3.04% 5.1% 8.2%
Yum China Holdings Inc. YUMC, -3.04% 10.0% 18.3%
Chipotle Mexican Grill Inc. CMG, -0.74% 9.6% 8.3%
Domino’s Pizza Inc. DPZ, +0.51% 23.1% 23.7%
Aramark ARMK, -2.40% 8.4% 7.1%
Dunkin’ Brands Group Inc. DNKN, -1.35% 53.0% 3.6%
Texas Roadhouse Inc. TXRH, -2.00% 9.9% 10.1%
Wendy’s Co. WEN, +0.18% 31.8% 30.6%
Cracker Barrel Old Country Store Inc. CBRL, +2.06% 1.0% 2.0%
Cheesecake Factory Inc. CAKE, -1.39% 5.4% 4.7%
Dave & Buster’s Entertainment Inc. PLAY, -4.17% 10.9% 9.6%
Jack in the Box Inc. JACK, -2.56% -48.0% -38.8%
Wingstop Inc. WING, -0.80% 46.1% 13.9%
Bloomin’ Brands Inc. BLMN, -0.56% 1.7% -2.5%
Brinker International Inc. EAT, -2.67% 2.1% 0.6%
Papa John’s International Inc. PZZA, -1.83% -9.4% -8.4%
Shake Shack Inc. Class A SHAK, -6.44% 23.6% 26.2%
Sonic Corp. SONC, +0.09% -8.8% -8.9%
Dine Brands Global Inc. DIN, -2.29% 26.3% 22.8%
BJ’s Restaurants Inc. BJRI, -3.12% 6.3% 6.8%
MTY Food Group Inc. MTYFF, +1.24% 26.7% 20.3%
Source: FactSet

For earnings per share, adjusted figures are available for previous quarters, which is helpful for comparison. In the case of McDonald’s, for example, GAAP EPS was $2.32 during the third quarter of 2017. However, that included 56 cents from gains on the sale of the company’s business in China, partially offset by “unrelated strategic charges,” leaving adjusted EPS of $1.76. Here are EPS estimates for the current quarter compared with a year earlier for the group:

Company Ticker  Consensus quarterly EPS estimate Adjusted quarterly EPS – year earlier Expected change in quarterly EPS
McDonald’s Corp. MCD, +0.41% $1.99 $1.76 13%
Starbucks Corp. SBUX, +0.03% $0.60 $0.55 9%
Yum! Brands Inc. YUM, -0.47% $0.84 $0.68 23%
Restaurant Brands International Inc. QSR, +0.40% $0.65 $0.58 11%
Darden Restaurants Inc. DRI, -3.04% $0.90 $0.73 24%
Yum China Holdings Inc. YUMC, -3.04% $0.46 $0.52 -12%
Chipotle Mexican Grill Inc. CMG, -0.74% $2.03 $1.33 52%
Domino’s Pizza Inc. DPZ, +0.51% $2.70 $2.09 29%
Aramark ARMK, -2.40% $0.72 $0.54 33%
Dunkin’ Brands Group Inc. DNKN, -1.35% $0.73 $0.61 19%
Texas Roadhouse Inc. TXRH, -2.00% $0.54 $0.43 26%
Wendy’s Co. WEN, +0.18% $0.15 $0.09 67%
Cracker Barrel Old Country Store Inc. CBRL, +2.06% $1.90 $1.92 -1%
Cheesecake Factory Inc. CAKE, -1.39% $0.58 $0.56 4%
Dave & Buster’s Entertainment Inc. PLAY, -4.17% $0.23 $0.29 -20%
Jack in the Box Inc. JACK, -2.56% $0.86 $0.73 17%
Wingstop Inc. WING, -0.80% $0.19 $0.17 13%
Bloomin’ Brands Inc. BLMN, -0.56% $0.09 $0.12 -28%
Brinker International Inc. EAT, -2.67% $0.45 $0.42 7%
Papa John’s International Inc. PZZA, -1.83% $0.22 $0.60 -63%
Shake Shack Inc. Class A SHAK, -6.44% $0.13 $0.17 -22%
Sonic Corp. SONC, +0.09% $0.33 $0.30 9%
Dine Brands Global Inc. DIN, -2.29% $1.52 $0.91 67%
BJ’s Restaurants Inc. BJRI, -3.12% $0.22 $0.15 46%
MTY Food Group Inc. MTYFF, +1.24% $0.75 $0.89 -16%
Source: FactSet

Here’s a summary of analysts’ ratings and price targets for the largest 25 publicly traded restaurant operators headquartered in the U.S. and Canada:

Company Ticker Share ‘buy’ ratings Share neutral ratings Share ‘sell’ ratings Closing price – Oct. 19 Consensus Target Upside
McDonald’s Corp. MCD, +0.41% 75% 25% 0% $167.49 $184.38 10%
Starbucks Corp. SBUX, +0.03% 47% 53% 0% $58.66 $58.79 0%
Yum! Brands Inc. YUM, -0.47% 46% 54% 0% $89.40 $90.77 2%
Restaurant Brands International Inc. QSR, +0.40% 76% 24% 0% $57.39 $69.35 21%
Darden Restaurants Inc. DRI, -3.04% 50% 42% 8% $106.33 $121.45 14%
Yum China Holdings Inc. YUMC, -3.04% 57% 36% 7% $31.85 $41.31 30%
Chipotle Mexican Grill Inc. CMG, -0.74% 30% 52% 18% $428.54 $460.57 7%
Domino’s Pizza Inc. DPZ, +0.51% 57% 43% 0% $267.75 $293.10 9%
Aramark ARMK, -2.40% 64% 36% 0% $38.25 $49.27 29%
Dunkin’ Brands Group Inc. DNKN, -1.35% 23% 67% 10% $72.60 $71.38 -2%
Texas Roadhouse Inc. TXRH, -2.00% 20% 65% 15% $66.16 $66.31 0%
Wendy’s Co. WEN, +0.18% 62% 38% 0% $17.02 $20.07 18%
Cracker Barrel Old Country Store Inc. CBRL, +2.06% 22% 67% 11% $158.32 $152.50 -4%
Cheesecake Factory Inc. CAKE, -1.39% 9% 86% 5% $49.59 $54.00 9%
Dave & Buster’s Entertainment Inc. PLAY, -4.17% 100% 0% 0% $57.40 $70.22 22%
Jack in the Box Inc. JACK, -2.56% 44% 56% 0% $77.92 $98.73 27%
Wingstop Inc. WING, -0.80% 53% 40% 7% $70.79 $68.69 -3%
Bloomin’ Brands Inc. BLMN, -0.56% 31% 62% 8% $19.56 $22.55 15%
Brinker International Inc. EAT, -2.67% 20% 65% 15% $46.35 $46.38 0%
Papa John’s International Inc. PZZA, -1.83% 63% 37% 0% $52.44 $56.83 8%
Shake Shack Inc. Class A SHAK, -6.44% 23% 46% 31% $54.62 $56.40 3%
Sonic Corp. SONC, +0.09% 0% 100% 0% $43.30 $43.35 0%
Dine Brands Global Inc. DIN, -2.29% 100% 0% 0% $84.78 $104.25 23%
BJ’s Restaurants Inc. BJRI, -3.12% 43% 50% 7% $65.53 $71.00 8%
MTY Food Group Inc. MTYFF, +1.24% 50% 50% 0% $53.00 $66.17 25%
Source: FactSet

Among the 25 largest publicly traded restaurant operators in the U.S. and Canada, only three — Restaurant Brands International QSR, +0.40% (which operates Burger King), Dave & Buster’s Entertainment PLAY, -4.17% and Dine Brands Global DIN, -2.29% (which runs Applebee’s and IHOP) — have a higher percentage of “buy” or equivalent ratings than McDonald’s.

Create an email alert for Philip van Doorn’s Deep Dive columns here.

Source: Read Full Article