McDonald’s Corporation
April Hahnfeld
Analyst July 18, 2010
HOLD
• Threat of Competition: High
• Threat of New Entrants: High
• Threat of Substitution: Low-Moderate
• Power of Suppliers: Low
• Power of Buyers: Low
• Best profit margin in the industry
• Moderate Leverage
• Good dividend yield and earnings growth
• Attractive per-share earnings growth due to large share repurchases
• Significant internal exposure and shareholder focus
• Commodity cost risks
• Extremely competitive industry
• High food, energy, and labor cost concerns
• Product failures
McDonald’s Corporation’s principal activity is to franchise and operate McDonald’s restaurants in the food service industry. These restaurants serve a varied, yet limited, value-priced menu in more than 100 countries worldwide. All restaurants are operated either by the Company or by franchisees, including conventional franchisees under franchise arrangements, and foreign-affiliated markets and developmental licensees under license agreements. Independently-owned and operated distribution centers, approved by the Company, distribute products and supplies to most McDonald’s restaurants. In addition, restaurant personnel are trained in the storage, handling and preparation of products and in the delivery of customer service. In February 2009, the Group sold its interest in Redbox Automated Retail, LLC.1
1 Thomson One
Ticker
MCD
Exchange
NYSE
Industry
Retailing - Foods
Sector
Consumer Services
Classification
Income &
Capital Appreciation
Market Cap.
$71,153 M
52 Week Price range
$53.88 - $71.84
Recent Price
$69.22 (7/9/2010)
Current P/E
15.59
Projected 2012 P/E
14.27
2009 EPS
$3.98
Projected 2012 EPS
$
Dividend Yield
3.33%
Debt Rating
AA-
Beta
0.61
Porter’s 5 Forces:
Pros:
Cons:
Brief Overview
Recommendation:
The EIF currently has 3.64% of equity assets invested in