Analysis of Fast Food Industry Giants McDonalds, Burger King and Wendys

The holiday season is in full swing and the industry that is most affected by it is the food industry. The fast food section of the industry is one of the major players in the holiday season as it caters to the section of the population that wants a ready meal without any fuss with a negligible waiting period, if any. This is the reason for the high sales in the holiday season.

Burger King (NYSE:BKW) has decided to revamp its image. It is letting go of its mascot, the Monarch in an attempt to attract more consumers. It is getting an image makeover. The remodeling of the activities should be complete by the middle of the next year. It is making efforts to attract seniors as well as women by the remodeling in an effort to attract new customers and boost sales. In New York, it has also started a system of home delivery. Sales have already started to increase and there is excess cash available with the company that has been passed on to the investors in the form of a dividend. This is especially significant, considering that tax rates on dividend will rise in the next year. The analysts are estimating a rise in EPS of about 1.70% for 2012 and 2013.

Wendy’s Company (NASDAQ:WEN) is heading in the opposite direction to Burger King. While Burger King decides to come down to the level of the common man, Wendy’s wants to prove that its products are a cut above the rest. The menu however, has not changed. The company’s strategy with respect to the investors is to increase dividends. It has also promised to repurchase shares. However, the timing of the shares repurchase will make a huge difference to consumer sentiment considering that taxes are set to be higher in 2013. The remodeling effort seems to be behind schedule and the margins of the company are also lower when compared to the other companies. The analysts are estimating a fall in EPS of about 7.69% for 2012 and 2013.

McDonalds Corp (NYSE:MCD), a company that was growing rapidly over the last few years is now thinking of offering deals to the public. The only reason is that it is facing tough competition from other brands. The company’s third quarter results have been lower than expectations. European operations are especially bad. The company operated a discount scheme in Germany that helped it maintain market share there. In Australia too, the company introduced the Loose Change Menus that helped market share from sliding. However, the shares of the company are not doing well and the stock has been downgraded from buy to neutral due to fall in sales in stores that have been open for at least a year.  The analysts are estimating neither a rise nor a fall in EPS i.e. 0% change for 2012 and 2013.

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Published by Viraj Shah

Viraj Shah has done M.Com (Finance) and currently pursuing CFP. He is a technical analyst who tracks US markets along with other global markets like India very closely. He is very passionate about stocks and believes that money can always be made in market.

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