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McDonald’s Corporation (MCD), Yum! Brands, Inc. (YUM): Which Quick Service Restaurants Is a Good Buy Now?

McDonald’s Corporation (NYSE:MCD) recently experienced a 2.7% drop to around $97.60 per share. The recent drop was due to the sluggish second quarter earnings results, which missed analysts’ expectations. Famous investors including Jim Chanos, Jim Simons and Ken Fisher have McDonald’s Corporation (NYSE:MCD) in their investment portfolios. Let’s dig deeper to see whether or not we should be bullish about McDonald’s Corporation (NYSE:MCD) now.
McDonald's Corporation (NYSE:MCD)

Second quarter earnings results, which missed estimates

In the second quarter, McDonald’s Corporation (NYSE:MCD) managed to increase its revenue by 2.4% to nearly $7.1 billion while the net income came in at around $1.4 billion, or $1.38 per share, 4% higher than the net income of $1.35 billion, or $1.32 per share, in the second quarter last year. The EPS fell short of analysts’ estimates of $1.40 per share. The global comparable sales rose by around 1%.

The company reported that the 1% growth in second quarter comparable sales in the U.S. was due to the introduction of its four key growth categories including beef, chicken, beverages and breakfast, the support for the Dollar Menu and the company’s classic core favorites.

McDonald’s Corporation (NYSE:MCD) experienced a decline in comparable sales in Europe and emerging markets including Asia/Pacific, Middle East and Africa (APMEA). Don Thompson, the company’s President and CEO remained bullish about McDonald’s Corporation (NYSE:MCD) future despite the sluggish outlook till the end of the year. He said: “I am confident that our System, global infrastructure and the unique and evolving McDonald’s brand experience will enable us to deliver sustained profitable growth for the long-term.”

What attracts long-term investors is the consistent cash return to its shareholders. In the second quarter, McDonald’s reported that it had returned $1.2 billion via both dividends and share repurchases. McDonald’s has expanded its business footprint in new emerging and promising markets.

Recently, McDonald’s has announced the developmental licensee for Vietnam market. Vietnam is a favorable market with attractive demographics for consumer good global giants with a population of nearly 90 million. The first restaurant in Vietnam will be opened at the beginning of next year.

At $97.60 per share, McDonald’s is worth around $97.80 billion. The market values McDonald’s at 11.3 times its trailing EBITDA (earnings before interest, taxes, depreciation and amortization). The dividend yield is around 3.10% at its current price.

The lowest valuation with the highest dividend yield

Interestingly, compared to much smaller peers including Burger King Worldwide Inc (NYSE:BKW) and Yum! Brands, Inc. (NYSE:YUM), McDonald’s is the cheapest business among the three.

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