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Mcdonalds Corp.

Mcdonalds Corp. GREG BRUNO, LISANDRO TSAI, DREW OSIKA, MEILING LIU Presented: November 11, 2010. History of Holding. Bought 200 shares of MCD on March 3 rd , 2009 @ $52.44 As of November 10 th , 2010, MCD trades @ $79.50 for an unrealized gain of 51.6%

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Mcdonalds Corp.

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  1. Mcdonalds Corp. GREG BRUNO, LISANDRO TSAI, DREW OSIKA, MEILING LIU Presented: November 11, 2010

  2. History of Holding • Bought 200 shares of MCD on March 3rd, 2009 @ $52.44 • As of November 10th, 2010, MCD trades @ $79.50 for an unrealized gain of 51.6% • Currently paying $2.44 annual dividend/share • 3% yield • $15,900 total value represents 4.8% of portfolio’s holdings

  3. Company Overview • Market leader in the global fast food industry • Offers core menu with some geographic variations • 32,478 restaurants in 117 countries (as of Dec. 31, 2009) • Serves 58 million customers daily and employs 385,000

  4. Business Model • Franchise/Company-owned store mix • Franchise generates consistent rent and royalties at high margins • Company-owned generates full revenues but for lower margins with unpredictable costs • Supplies food and materials to restaurants through approved 3rd party operators

  5. Strategy • “Plan to win” (November 2004) • Renewed focus on people, products, place, price and promotion • 5-year NI growth of 75% (2005-09) vs. 14% (2000-05).1 • Refranchise restaurants to stabilize cash flows and increase margins • Ongoing initiatives2 • Service enhancement • Restaurant reimaging • Menu innovation • Grow aggressively in China • http://www.wikinvest.com/stock/McDonald%27s_%28MCD%29/Data/Net_Income_To_Common • McDonald’s Corporation 10-K Statement for FY2009, Page 12.

  6. Revenue Share by region

  7. Main Competitors • Yum Brands, Inc. (YUM) • Wendy’s Arby’s Group Inc. (WEN) • Burger King Corporation • Doctor's Associates Inc.  • Starbucks Corporation

  8. Industry Overview • Fast Food Restaurant Industry • Slow growth in the United States: 0.5% from 2005-2010 and 2.5% from 2010-2015 • Consumers are choosing to buy lower-priced fast food items, cutting into revenue growth • Consumers are more health conscious • Domestic market saturation, oversees expansion • Low concentration • High competition

  9. Industry Overview Market Share in the US by Revenue

  10. Management Assessment • Exceeded or met targets for: • Long-term, constant currency financial targets of average annual Systemwide sales growth of 3% to 5% • Average annual operating income growth of 6% to 7% • Returned $16.6bn to shareholders under their $17 – $19bn target for 2007 through 2009 • Management is placing much of their future growth in APMEA region Source: McDonald’s 2009 10-K, http://www.sec.gov/Archives/edgar/data/63908/000119312510042025/d10k.htm#toc84160_8

  11. Issues Of Concern • Rising food prices • Rising labor costs • Currency Wars • Earnings are affected by changes in particularly Euro, British Pound, Australian Dollar and Canadian Dollar. • Collectively these currencies represent approximately 70% of company’s operating income outside of US. Source: McDonald’s 2009 10-K, http://www.sec.gov/Archives/edgar/data/63908/000119312510042025/d10k.htm#toc84160_8

  12. Performance and Financial Measures Source: McDonald’s 2009 10-K, http://www.sec.gov/Archives/edgar/data/63908/000119312510042025/d10k.htm#toc84160_8

  13. Performance and Financial Measures Source: McDonald’s 2009 10-K, http://www.sec.gov/Archives/edgar/data/63908/000119312510042025/d10k.htm#toc84160_8

  14. DuPont Analysis

  15. Public Comparables

  16. Discount Rate • Discount Rate at lower end of acceptable range • Low yield environment • McDonalds transitioning to a higher margin business model • McDonalds management committed to returning value to shareholders.

  17. Discounted Cash Flow Analysis

  18. Sensitivity Analysis

  19. Weighted Valuation

  20. Recommendation • Hold our current position of 200 shares

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