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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

Mcdonalds Corp.

GREG BRUNO, LISANDRO TSAI, DREW OSIKA, MEILING LIU

Presented: November 11, 2010

history of holding
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
company overview
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
business model
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
strategy
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.
main competitors
Main Competitors
  • Yum Brands, Inc. (YUM)
  • Wendy’s Arby’s Group Inc. (WEN)
  • Burger King Corporation
  • Doctor's Associates Inc. 
  • Starbucks Corporation
industry overview
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
industry overview1
Industry Overview

Market Share in the US by Revenue

management assessment
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

issues of concern
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

performance and financial measures
Performance and Financial Measures

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

performance and financial measures1
Performance and Financial Measures

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

discount rate
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.
recommendation
Recommendation
  • Hold our current position of 200 shares
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