The U.S. economy has been exhibiting a solid recovery this year, as evidenced by its 6.4% annual GDP growth in the first quarter. Among other favorable economic data, consumer spending is steadily returning to pre-pandemic levels thanks to governmental rescue packages and steady job growth. However, rising purchasing power is creating inflationary pressure in the economy and, thus, introducing volatility to the markets…
In these circumstances, we think blue chip stocks are the best picks. Blue chip stocks represent large, well-known companies that are known for their financial resiliency and balance sheet strength. While blue chip stocks are not immune to market downturns, they are the favorites of low-risk investors because they have a history of delivering steady returns over the long-term and offer protection during short-term market fluctuations.
Given this backdrop, we think it is wise for investors to scoop up fundamentally-sound blue chip stocks McDonald’s Corporation (MCD – Get Rating), Starbucks Corporation (SBUX – Get Rating), 3M Company (MMM – Get Rating), and Altria Group, Inc. (MO – Get Rating). They have shown decent strength over last year and are well-positioned to offer attractive returns this year.
MCD is one of the world’s leading global foodservice retailers with more than 39,000 locations in more than 100 countries. Its restaurants offer various food products and beverages, as well as a breakfast menu. Approximately 93% of MCD’s restaurants are franchised and operated by independent local business owners. The company functions through three segments–U.S., International Operated Markets, and International Developmental Licensed Markets & Corporate.
Because consumer demand for fast-food and foot traffic at quick service restaurants (QSRs) are returning steadily to pre-pandemic levels, MCD is on a hiring spree and wants to hire 10,000 more hourly employees over the next three months. Furthermore, workers at MCD’s company-owned 660 U.S. locations will also see pay raises that average 10% over the next several months. MCD is also on track with its new growth strategy, Accelerating the Arches, which it unveiled last December. The strategy encompasses all aspects of the company’s business as the leading global omni-channel restaurant brand.
In the first quarter, ended March 31, 2021, MCD’s revenue increased 9% year-over-year to $5.12 billion. Its global comparable store sales increased 7.5% during the quarter due to a strong recovery in the international operated markets. Moreover, its revenue improved month-to-month throughout the quarter. Its comparable sales results in the U.S. benefited from 13.6% average check growth, versus the year-ago 0.1% rise. Its adjusted EPS came in at $1.92, rising 31% compared to the prior year value of $1.47.
MCD’s dominance in the global food-service industry and large scale of operations helped it rise sharply with the recovery in the quick service restaurant (QSR) market. In fact, the chain managed to stay afloat amid the pandemic by rapidly integrating digital sales, delivery services and takeaways. MCD is further benefiting from its expansion efforts, comps growth and menu innovation.
Despite the pandemic, MCD opened about 500 restaurants in 2020, and the chain is planning to open more than 1,300 restaurants globally this year. Notably, MCD has already opened 150 new restaurants in China during the first quarter and is on track to open 500 restaurants in the country this year. The stock has returned nearly 30% over the past year and may gain further momentum. Analysts expect MCD’s current year revenue and EPS to improve 16.6% and 42.3%, respectively.
MCD’s POWR Ratings are consistent with this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
MCD has an A grade for Quality, and a B grade for both Growth and Stability. The stock is currently ranked #5 in the 47-stock, A-rated Restaurants industry.
In total, we rate MCD on eight different levels. Beyond what we stated above, we have also given MCD grades for Value, Momentum and Sentiment. Get all MCD’s ratings here.
With nearly 33,000 stores around the globe, SBUX is the premier roaster, marketer, and retailer of specialty coffee, tea and other beverages, and fresh food items worldwide. SBUX has rapidly grown into the world’s dominant coffee shop-themed chain over five decades in 83 markets. It operates through three main business segments: Americas, International, Channel Development, and Corporate and Others.
On May 13, Generate, a leading provider of sustainable infrastructure, announced the establishment of the first six of up to 23 New York State community solar projects under an innovative multi-year facility with Starbucks Coffee Company. The projects are expected to…
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