McDonald's is a (Valuable) Real Estate Company

4/22 - "McDonald’s “global momentum is apparent,” said Buckingham Research analyst Mitchell J. Speiser...While the fast-food chain was not “immune” to the slowing economy in the United States, Speiser pointed out that half the company’s profits were generated from international sales. McDonald’s was still taking market share in the United States despite decelerated sales, he said, and “has unbelievable strength across all regions outside the U.S.”

"Speiser forecast “tremendous long-term sales” for McDonald’s. As developing economies continue to progress, inflated workforces will drive breakfast and drive-through sales. Those markets have been a generation behind the American markets for McDonald’s, “a fundamental long-term opportunity” for investors."

"Shares of McDonald’s fell 0.6%, or 32 cents, to $58.35, on Tuesday. Speiser termed the share price fall a myopic reaction to the company’s slightly negative comparable-store U.S. sales in March...Speiser explained that comparable sales were down in March—the first negative comparable sale in “many years”—due to “the Easter shift.” The Easter holiday occurred earlier this year than usual which had a negative impact on drive-through sales."

4/23 - "Yum! Brands (NYSE: YUM) reported Q1 numbers Tuesday after the bell, and the company came through with double-digit growth on the bottom line. Net sales increased 8%, and earnings per share, adjusted for special items, increased 19% to $0.42."

"The international story for Yum! is a good one, with operating profit for this part of the company increasing 18%. China continues to be a strong territory for the KFC, Taco Bell, and Pizza Hut brands -- as many have pointed out, Yum! is a great way to gain exposure to this market. And how about this -- management saw fit to buy back shares of the company to the tune of almost a billion bucks!"

"Yum!, which competes with McDonald's (NYSE: MCD), Burger King (NYSE: BKC), Wendy's (NYSE: WEN), and all manner of neighborhood eateries, needs to continue the good fight on the home front. It reversed a negative same-store sales trend this past quarter, but management must not rest on this nice stat -- Yum! must explore better marketing campaigns and branding tactics to keep the comps headed higher. Yum!'s stock is not far from a 52-week high, but I'm currently bullish on its prospects."

4/14 - "We have removed the NR designation from Wendy’s shares and add it to the Sell list with a 12-month price target of $21 (10% downside). We expect ongoing operational challenges with market share declines (at the hands of MCD & BKC) which, when coupled with cost burdens, should keep ‘core’ margins pressured. We see a low likelihood of a sale (credit environment/eroding fundamentals), and, with nearly a year of uncertainty under the Special Committee, franchisee discontent is growing and initiatives that could have positively driven sales/margins have been slow to develop (remodels, refranchising) prolonging any business turnaround in our view."

"We are lowering our 2008-2010 EPS estimates to $1.25 ($1.30), $1.45 ($1.53) and $1.65 ($1.74), respectively. These changes are the result of more conservative top-line growth assumptions, associated margin deleverage, modest cost saves, delayed refranchising, asset sales and breakfast roll-out. Among QSRs we favor McDonald’s (CL-Buy) and Burger King (Buy), both of which are gaining market share and benefiting from established breakfast businesses, clear marketing messages and international strength. In our view, investors will continue to pay for these attributes that WEN either lacks or is struggling to define."

"Wendy’s shares currently trade at 18.6X our new CY08 EPS vs QSR peers at 16X, a multiple point above McDonald’s and inline with Burger King, suggesting to us a takeout or restructuring premium is still in the stock. We think the former is unlikely and the timing and makeup of the latter is uncertain. Our $21 price target (P/E, DCF) implies 15X CY09 EPS."