McDonald's posts 1st monthly sales drop in 9 years
But the stock, down more than 13% since January, is still a good value.
The Oakbrook, Ill., company said sales at restaurants open at least 13 months fell 1.8% in October, as consumers flocked to rivals, including Burger King (BKW), which has been revamping its menus. Sales slumped 2.2% in the U.S. and Europe, and dropped 2.4% in Asia Pacific, the Middle East and Africa.
CEO Don Thompson, who assumed the job earlier this year after the retirement of Jim Skinner, is ratcheting up marketing spending on its Dollar Menu to appeal to cash-strapped consumers.
During the last quarter, same-store sales, a key metric, rose 1.9% at McDonald's, lagging the 3.2% increase at Wendy's (WEN) and the 2.3% gain seen at Sonic (SONC), according to the companies' investor reports. Even Burger King, which has been in the shadow of McDonald's for decades, managed to post better-than-expected earnings. Rising food prices will also depress earnings for McDonald's and the rest of the restaurant industry for some time to come.
Though it might be tempting for investors to throw in the towel on McDonald's, I am not ready to do that quite yet. The company may be down, but it is far from out. For one thing, the U.S. economy continues to improve, albeit at an agonizingly slow pace. Once consumers become more confident, they will move from the Dollar Menu to pricier items such as gourmet coffee. McDonald's also has a long history of savvy marketing, developing innovative products, and delivering for shareholders.
Wall Street hasn't given up on McDonald's yet either. The average 52-week price target on the stock is $106.05, more than 23% above where it recently traded. Shares of McDonald's are off over 13% this year. With a price-to-earnings multiple of 16.36, the company's shares are near their five-year low in terms of valuation, according to Reuters.
The rewards of owning McDonald's shares far outweigh the risks. As an added bonus, the company also pays a dividend that yields 3.1%.
Jonathan Berr is long McDonald's. Follow him on Twitter@jdberr
MORE ON MSN MONEY
VIDEO ON MSN MONEY
cheese burger was my last meal :-(
Loved my McD's cheese burger after my parky run.
LOVE THE SWEET TEA !!
SALES DOWN BECAUSE SIMPLY THERE ARE TOO MUCH COMPETITION !
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The stock market ended the holiday-shortened week on a mixed note as the Dow Jones Industrial Average shed 0.1%, while the S&P 500 added 0.1% with seven sectors posting gains.
Equity indices faced an uphill climb from the opening bell after disappointing quarterly results from Google (GOOG 536.10, -20.44) and IBM (IBM 190.04, -6.36) weighed on the early sentiment. Google reported earnings $0.15 below the Capital IQ consensus estimate on revenue of $15.42 ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|