+ All Categories
Home > Documents > McDonald ’ s Corp. (MCD) - NYSE

McDonald ’ s Corp. (MCD) - NYSE

Date post: 31-Dec-2015
Category:
Upload: davis-wiggins
View: 30 times
Download: 0 times
Share this document with a friend
Description:
McDonald ’ s Corp. (MCD) - NYSE. Patrick O ’ Donnell & Matthew Rasinski Thursday, April 11, 2013. Agenda. Introduction Company Overview Current Events Industry Overview Stock Performance Financial Analysis Valuation Recommendation. Introduction. - PowerPoint PPT Presentation
Popular Tags:
21
McDonald’s Corp. (MCD) - NYSE Patrick O’Donnell & Matthew Rasinski Thursday, April 11, 2013
Transcript
Page 1: McDonald ’ s Corp. (MCD) - NYSE

McDonald’s Corp. (MCD) - NYSEPatrick O’Donnell & Matthew RasinskiThursday, April 11, 2013

Page 2: McDonald ’ s Corp. (MCD) - NYSE

Agenda

Introduction Company Overview Current Events Industry Overview Stock Performance Financial Analysis Valuation Recommendation

Page 3: McDonald ’ s Corp. (MCD) - NYSE

Introduction

McDonald’s was founded in 1940 by Richard and Maurice McDonald in San Bernardino, California

It is the largest chain of hamburger fast fast food restaurants, serving 68 million customers daily in 119 countries

Ray Kroc purchased a franchise in 1955 and shorty after purchased the entire chain from the McDonald brothers

Headquarters – Oak Brook, Illinois, U.S.

Page 4: McDonald ’ s Corp. (MCD) - NYSE

Company Overview

McDonalds operates over 34,000 restaurants worldwide

Employ over 1.7 million people Notable for their 25 year consecutive

dividend increase to shareholders – S&P 500 Dividend Aristocrats

More recently spun-off Chipotle Mexican Grill, Donatos Pizza, and Boston Market among others

Sector: Services, Industry: Restaurants

Page 5: McDonald ’ s Corp. (MCD) - NYSE

Global Operations

Wikimedia Commons

Page 6: McDonald ’ s Corp. (MCD) - NYSE

Current Events

Management has shifted gears by catering to young adults rather then the family friendly market segment No more play pens, baby seats, etc.

Super Size Me Legislation – restriction by Congress currently being debated pertaining to calorie intake Drink size, burger, and fry reductions and

reconfigurations McDonalds are recently combating this negative

press by including a healthy option Fruit smoothies, yogurt, salad, whole vegetables and

fruits

Page 7: McDonald ’ s Corp. (MCD) - NYSE

New York Ban on Super-Sized Drinks

washingtonexaminer.com

Page 8: McDonald ’ s Corp. (MCD) - NYSE

Declining Soft Drink Sales

The overall trend for soft drinks is steadily declining

This is bad news for fast food restaurants considering drink sales are the most profitable segment on the menu

dividendbuddy.com

Page 9: McDonald ’ s Corp. (MCD) - NYSE

Labor Strikes

New York labor strikes on fast food chains are causing serious problems

High probability that minimum wages will rise in New York and across the nation

CNN Money

Page 10: McDonald ’ s Corp. (MCD) - NYSE

Equity Snapshot

Stock Price: $101.42

Beta: .34 5 Year PEG

Ratio: 1.87 TTM P/E:

17.58 Forward P/E:

17.57 Div. Yield: 3%

Page 11: McDonald ’ s Corp. (MCD) - NYSE

Industry Overview

McDonalds is far larger company then all its competitors in terms of sales and market cap

Page 12: McDonald ’ s Corp. (MCD) - NYSE

McDonald's Market Share

Page 13: McDonald ’ s Corp. (MCD) - NYSE

Stock Performance

McDonald’s performance from the purchase date of 2008 has a total yield of 96%, done handsomely as compared to its competitors

Page 14: McDonald ’ s Corp. (MCD) - NYSE

Porter’s 5 Forces

Bargaining Power of Buyers: High Many fast food chains to choose from both domestically

and internationally Bargaining Power of Suppliers: Low

Low quality food items are a commodity Threat of New Substitutes: Moderate

Alternatives such as 1-minute meals, healthy living, are all driving forces that compete with the consumers’ wallet

Competitive Rivalry: High Industry competes heavily with one another in terms of

price and market share Threat of New Entrants: Moderate

Emerging players may come from all walks of life, primary limiting factors are brick and mortar costs

Page 15: McDonald ’ s Corp. (MCD) - NYSE

How Does MCD Make Money? Company Operated Stores (40% total

revenue) Franchise Revenue (60% total revenue)

US (44% of total revenue) Europe (24% of total revenue) Asia/Pacific, Middle East, Africa (20% of

total revenue) Other (12% of total revenue)

Page 16: McDonald ’ s Corp. (MCD) - NYSE

Is the Money Growing?

US Sales Growth 3.3% Customer Growth (1.9%)

Europe Growth 2.4% Customer Growth (-.5%)

APMEA Growth 1.4% Customer Growth (2.2%)

Other Growth 7.7% Customer Growth (3%)

Page 17: McDonald ’ s Corp. (MCD) - NYSE

How does McDonalds make money? Focus on balancing core menu classics with new

products and promotional food events, such as Chicken McBites, Blueberry Banana Nut Oatmeal, and additional McCafe beverage offerings.

New product introductions were among the largest drivers of revenue growth in 2010 and 2011 (Note: These items had significantly high profit margins)

Target Customers: Medium Income Households (who spend roughly 40% of their food budget on dinning out) and 18 to 25 year olds (who spend nearly 46.4 of their food budget on dinning out)

Page 18: McDonald ’ s Corp. (MCD) - NYSE

The Good, The Bad, The Questionable The Good: APMEA geographic segment

growth of 17.0% The Bad: “Dollar Menu” incentives are not

bringing in the growth the in sales as the company had relied on in the past.

The Questionable: “Angus” products are attempting to increase the quality of McDonalds products, however the lack of profit margin may cause the product to be abandon.

Page 19: McDonald ’ s Corp. (MCD) - NYSE

Financial Projections

See Excel Model

Concerns:

Discount Rate High ROE Previous Valuation Errors

Page 20: McDonald ’ s Corp. (MCD) - NYSE

RCMP

December 2008 Valuation: $49.63 March 2009 Valuation: $63.27 December 2009 Valuation: $66.87 March 2010 Valuation: $77.95 November 2010 Valuation: $77.55 March 2011 Valuation: $73.83 October 2011 Valuation: $93.05 October 2012 Valuation: $95.81

Page 21: McDonald ’ s Corp. (MCD) - NYSE

Recommendation: SELL

Sell 200 Shares at MKT Price

Stock maybe at peak price due to recent market exuberance

McDonalds does not seem to fit with the general portfolio goals of RCMP (its difficult to discover value in a stock covered my many analysts)

There is no shame in leaving the poker table on top Our Gain: $9,810 (Increase of 93.54%)


Recommended