Saturday, August 8, 2009

MCD - McDonald's Corp.

When the economy tanks, people change their habits. They start buying more things from discounters like Family Dollar (NYSE: FDO), and more meals from less expensive eateries such as McDonald's (NYSE: MCD).
McDonald's Corporation franchises and operates McDonald's restaurants in the food service industry. These restaurants serve a varied, limited, value-priced menu in more than 100 countries globally. The restaurants are operated either by the Company or by franchisees, including franchisees under franchise arrangements, and foreign-affiliated markets and developmental licensees under license agreements. During the year ended December 31, 2007, the Company sold its businesses in Brazil, Argentina, Mexico, Puerto Rico, Venezuela and 13 other countries in Latin America and the Caribbean, which totaled 1,571 restaurants, to a developmental licensee organization. The Company and its franchisees purchase food, packaging, equipment and other goods from numerous independent suppliers.
There are roughly 32,000 McDonald's outlets worldwide, with the company owning about 6,500 and the rest being franchised.

Explore more MCD Data on Wikinvest

Positive: The revenues are increasing year after year, and also the net income. The business is relative low risk business. Low Beta: 0.7.

Explore more MCD Data on Wikinvest

In a conference call with investors, Chief Operating Officer Ralph Alvarez said that while same-store sales did slow in June, they were still positive and "our U.S. July comp sales are trending similar to or better than they did in June."
Further, he noted the company has begun the rollout of its Angus burger and although it is not yet being advertised nationally, "early results are strong, and customers are telling us they love the products. The Angus burger line will also be accretive to our margins."
Negative: First, the company sold its businesses in Brazil, Argentina, Mexico, Puerto Rico, Venezuela and 13 other countries in Latin America and the Caribbean. I think this will affect future revenue and increase the risk of the company since it is highly exposed to developed economies. But, on the other hand, steering in this direction has resulted in greater cash flow (which increased by 12% in 2007), reduced spending on operations, and less corporate exposure to rising commodities prices.

Secondly, the insider activity: selling. Over the last six months, 5K shares were bought, and 258K shares were sold in insider trading.
In addition, in the last quarter, revenue including results from franchised outlets fell to $5.65 billion from $6.08 billion. Revenue would have risen 4% but for the currency fluctuations.

MCD Quarterly chart and possible EWC (I will need your help with elliot since I am not an EW technician).

MCD Weekly chart with Fibonacci's supports

MCD monthly chart:
The security is moving within an uptrend channel, close to the support.

MCD weekly chart and possible Elliot Wave pattern for wave 4:

MCD Daily charts:

MCD vs USD Index: MCD is very sensitive to the movements in the USD Index:


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