April 23, 2014
Get ready to pack an artery with some corporate earnings from America's publicly traded fast-food all-stars. The Dow rose 65 points Tuesday as investors continue to eat up stocks like they're mid McNugget-binge.
1. McDonald's first-quarter sales were bland
Crushing Big Macs isn't that good for you, and neither was owning McDonald's (NYSE: MCD
) stock Tuesday. Shares of the McFlurry-makin' giant slipped 0.4% after reporting relatively unhealthy earnings
-- $6.7 billion in revenues during the first quarter of 2014 were just a 1% rise from last year, pretty much in line with analysts' expectations.
So why did U.S. sales fall? Just like 200 other companies reporting poor earnings this quarter, McD's blames the bad winter weather -- apparently, Ronald McDonald can't handle food logistics during polar vortexes. Plus, customers weren't interested in losing limbs to frostbite while waiting for their nuggets to fry, sending same-store sales down 1.7% during the first three months of 2014.
Just like a Happy Meal, there was one fun little treat in the earnings report. While domestic sales tasted as bad as the company's first attempt at making hash browns 20 years ago, international sales had some spice. European revenues rose 1.4%, and Asian revenues gained nearly 1% as foreigners continue to transition their diets to American obesity standards.
Interestingly, you might be asking why McDonald's customers were affected by the brutal winter, but Chipotle (NYSE: CMG
) , which reported a 13% sales gain for the quarter, wasn't. Well McD's got an answer for you: Apparently, younger, more health-conscious diners who enjoy well-balanced burritos over pre-heated fried chicken parts are willing to make cold treks for their wholesome guac.
2. Yum! Brands was saved by China's demand
Just like McD's, the fast food franchises over at Yum! Brands (NYSE: YUM
) froze, too, during the winter. The owner of KFC, Pizza Hut, and Taco Bell reported an unfulfilling $2.7 billion in revenue for the first quarter of 2014. Both Taco Bell and Pizza Hut sales declined more than 1%, leaving investors wondering if it's time to bring back the "Yo Quiero" chihuahua to make them feel better.
So why did the stock pop more than 3% in after-hours trading? China. Despite a potential slowdown in fast-food orders during the Chinese New Year during January and February, first-quarter sales improved 17% from the same period last year. They may not be Anthony Bourdain's top choices, but KFC and Pizza Hut led the sales surge.
The takeaway is that 2014 is all about an MSG-fueled comeback in Asia for Yum! Last year, bird-flu issues scared away consumers from chowing down
on the company's mysterious chicken-part packed products. With any signs of tainted ingredients behind them, Yum! is now planning to open 700 new stores in China, boasting 15 new health-compromising menu items at all of its Asian Pizza Hut locations.
3. Valeant proposes merger with Bill Ackman's botox company
Botox is in this spring mergers-and-acquisitions season. Valeant Pharmaceuticals (NYSE: VRX
) , a Canadian maker of beauty/dermatology products, proposed on its website Tuesday to merge with botox-maker Allergan (NYSE: AGN.DL
) , offering a combined $153 worth of cash and Valeant stock to AGN shareholders. Wall Street's reacting like it won the lottery, as the offer values Allergan at a hot $46 billion.
Allergan shares jumped from $142 to $164 Tuesday, despite the lack of free Botox samples included in the offer. In the press release, Valeant predicts $2.7 billion in annual cost savings, and also tax savings for the combined company. In a nutshell, the merger would make shareholders of both companies rich, happy, and wrinkle-free.
Bill Ackman is busy this year The hedge-fund manager is noted for his ongoing crusade to crush and burn nutrition supplement maker Herbalif
e shares (Ackman has a bet against Herbalife and will profit if the stock falls); but he's busy now trying to merge two mega creators of wrinkle-removing products
Is Ackman's merger bet paying off? Ackman's Pershing Square hedge fund crossed the 5% threshold of all of Allergen stock on April 10. Since then, the stock has grown from $117 to today's $164. Ackman will be pushing Allergan shareholders to get the 51% of votes needed to accept the offer; then he'll be Wall Street's (very wealthy) king of Botox.
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