Jamba owns the Jamba Juice brand and restaurant system, which through both company-owned and franchised stores is the largest retailer of smoothies in the US. The company also licenses its brand for development of consumer products and is expanding its franchise system internationally.
We maintain our BUY rating and continue to believe that Jamba has successfully developed the operating model for an efficient and profitable growth company. Investment highlights
JMBA reported EPS of $(0.09); we and the Street were at $(0.11). While the quarter was mixed vs. our forecast, the trends were generally favorable as a slightly softer comp was met with further profitability gains.
Comps of -1.2% were pretty resilient when viewed against growth of 7.7% in the prior-year period. Comps through the first two months of Q1/13 are surprisingly strong, trending modestly positive against 12.7% growth in Q1/12.
F2013 guidance is unchanged, as are our EPS forecasts on modestly higher revenue estimates given the stronger Q1 trends thus far. Valuation
The shares trade at 11x F2013 forecasted EBITDA. We view the valuation as attractive given the quality of the brand. Our $3.50 12-month price target is increased from $3 reflects 10x our C2014 EBITDA forecast
Credit Suisse raised their target price on McDonald’s as they believe MCD is well positioned to return to meaningful share gains in 2012, with upside to numbers if the macro environment stabilizes from a late January slowdown.
However, even if a slowing consumer environment limits absolute upside to numbers, relative outperformance on fundamentals combined with low relative valuation makes risk/reward attractive to the brokerage. The brokerage looks at drivers of 2006-11 share gains, and how they are set to reassert themselves in 2013. Credit Suisse believes that reestablishing a pricing gap, reemphasizing the dollar menu, and a much improved product pipeline (versus difficult competitor compares) can accelerate MCD share gains in 2013.
This analysis makes the brokerage comfortable with their above-consensus US comp estimates despite macro concerns. Credit Suisse already sees fewer risks to MCD’s estimates than to peers’, and a reacceleration in share gains could rapidly reverse valuation trends (relative to other burger quick service restaurants, MCD’s is near all-time lows.)
Any larger macro-driven “flight to stability” trade would only further benefit MCDs relative valuation/share performance, in the brokerage’s opinion.
The world’s largest restaurant chain was the biggest hit to the Dow on Wednesday, after President Barack Obama announced a plan to raise the minimum wage. The blizzard that lashed the U.S. Northeast at the end of last week possibly hurting the company’s sales, and Buffalo Wild Wings’ (BWLD) report on Tuesday that same-store sales are declining this year, may also be affecting McDonald’s stock, but most analysts agreed Obama’s call to raise the federal minimum was the main driver.
Obama called for a federal minimum wage increase to $9 an hour, from $7.25; he also proposed tying the minimum wage to the cost of living. The current minimum wage has been in effect since 2009. McDonald’s and its franchisees don’t disclose what they pay their restaurant workers. Its franchisees, as well as other restaurant chains, such as Wendy’s (WEN) and Jack in the Box (JACK), spend money lobbying against minimum-wage increases.
McDonald’s, which has about 14,000 U.S. locations, has been vying with other eateries to lure cash-strapped Americans. Earlier this month, the chain reported that U.S. same-store sales gained 0.9% in January as it advertised its Dollar Menu and tested new items to help boost sales.
! Shares of Wendy’s got a lift after the company received a positive mention in Barron’s over the weekend.
The magazine notes that over the past several months, the restaurant has gone back to its roots, focusing on high-quality products and better marketing, as well as a remodeling of its stores. Wendy’s has launched 66 new restaurants and 48 renovations that have met with a positive response from customers. Sales in the newer-looking stores are up 25% since remodeling.
The company plans to remodel 200 stores this year, and open 120 new units. In 2015 it is targeting 1,300 new and remodeled outposts. From a valuation perspective, Barron’s pointed to its enterprise value of 8.4 times EBITDA as attractive given than competitors such as McDonald’s (MCD) and Yum! Brands (YUM) sport EV/EBITDA ratios of 10 or higher.
times 2014 estimated EBITDA, the magazine says Wendy’s would be worth $7.20, and the upside is complimented with a dividend yield north of 3%.
Business owners and investors are rapidly maneuvering to shield themselves from the prospect of higher taxes next year, a strategy that is sending ripples across Wall Street and broad areas of the economy.
Take Steve Wynn, the casino magnate, who has been a vocal critic of higher tax rates. He and his fellow shareholders in Wynn Resorts, the company announced, will collect a special dividend of $750 million on Tuesday, a payout timed to take advantage of current rates. Experts estimated that taking the payout this year instead of next could save Mr. Wynn, who owns a sizable stake in the company, more than $20 million.
For the wealthy like Mr. Wynn, the overriding goal is to record as much of their future income this year as they can. This includes moves as diverse as sales of businesses, one-time dividends and the sale of stocks that have been big winners.
“In my 30 years in practice, I’ve never seen such a flood of desire and action to transfer a business and cash out,” said Kenneth K. Bezozo, a partner in New York with the law firm Haynes and Boone. “We’re seeing a watershed event.”
Whether small business owners or individuals saving for retirement, investors are being urged by their advisers to reconsider their holdings. Along the way, many are shedding the very investments that have been the most popular over the last year, contributing to recent sell-offs in formerly high-flying shares like Apple and Amazon.
Investors typically take profits in their own portfolio at year-end, but the selling appears to be more targeted this year. Stocks with large dividends, for instance, are seen as less attractive because of the perceived likelihood of a sharp increase in the tax rate on dividends.
Dyke Messinger is holding back on hiring for his business. (Chris Keane/The New York Times)All this is weighing on the broader financial markets, as worries mount about the economic drag from the combination of higher tax rates and reduced government spending set for January if President Obama and Senate Republicans cannot reach a budget compromise before then.
Fears about the fiscal impasse in Washington, along with anxiety about fading corporate profits and weakening economies abroad, have pushed the benchmark Standard & Poor’s 500-stock index down about 5 percent since the election. On Friday, major stock indexes had their best showing of the week after President Obama and Republican leaders signaled that a compromise was possible.
Even if many of the tax breaks scheduled to expire survive a new budget deal, some business owners and investors are bracing for substantial increases in specific areas of the tax code.
The top rate on dividends, for example, could climb to 39.6 percent from 15 percent if no action is taken. Capital gains taxes, which now top out at 15 percent, could rise above 20 percent, many financial advisers say. Most investment income will also be subject to a 3.8 percent charge to help pay for President Obama’s health care law.
Stocks that pay big dividends have been popular in recent years among investors eager for an alternative to the meager returns on bank savings accounts and Treasury securities. Since October, though, the two sectors that provide the most generous dividend payments — utilities and telecommunication stocks — have been among the worst performers, hurt also in part by the devastation of Hurricane Sandy on the East Coast. Utility companies in the S.& P. 500 have fallen 9.4 percent from their highs in October. Telecommunication stocks in the index have dropped 11.3 percent from theirs, compared with the broader index’s 6.8 percent decline from its recent high.
John Moorin, the founder of a medical equipment company near Indianapolis, said he sold about $650,000 in dividend-paying stocks like McDonald’s and Coca-Cola a few days after the election, worried about the potential increase in taxes.
“I love these companies, but I’m so scared that now all of the sudden I’m going to get taxed at such a rate with them that they won’t be worth anything,” Mr. Moorin said.
Although Mr. Wynn has declared special dividends at the end of the year before — most recently in 2011 — in a call with analysts last month, he hinted that higher taxes would cause him and other chief executives to rethink big payouts in future years.
In the meantime, he added, it was “very difficult to do long-range planning with a government that moves as much as this does on so many issues.”
Leggett & Platt, a diversified manufacturer based in Carthage, Mo., decided to move up payment of its fourth-quarter dividend to December from January so shareholders could take advantage of the lower rate.
“If we can help our shareholders avoid taxes and keep more of their dividends, we’ll do it,” said David M. DeSonier, senior vice president for corporate strategy and investor relations.
While negotiators are trying to find ways to raise more revenue for the long term, some experts expect a substantial bump in tax collections in the short term as investors take a multitude of steps now that they would have taken in future years. After the top tax rate on capital gains rose to 28 percent from 20 percent at the end of 1986, federal receipts from such gains doubled to $52.9 billion in 1987, as sales surged at the end of the previous tax year.
The potential jump in tax rates has been telegraphed for months, but many investors say they did not respond sooner because they were waiting to see if Mitt Romney would defeat the president and move forward with his commitment to keep rates at current levels. President Obama, since defeating Mr. Romney, has continued his call for an increase in marginal tax rates on the wealthy. A growing number of Republican leaders have conceded that some increase is now likely.
Kristina Collins, a chiropractor in McLean, Va., said she and her husband planned to closely monitor the business income from their joint practice to avoid crossing the income threshold for higher taxes outlined by President Obama on earnings above $200,000 for individuals and $250,000 for couples.
Ms. Collins said she felt torn by being near the cutoff line and disappointed that federal tax policy was providing a disincentive to keep expanding a business she founded in 1998.
“If we’re really close and it’s near the end-year, maybe we’ll just close down for a while and go on vacation,” she said.
Of the potential changes in the tax code set to take place on Jan. 1, the scheduled increase in the tax rate on capital gains would hit a particularly broad range of investments.
Business owners, for instance, can lock in the current top rate of 15 percent on capital gains if they sell their company before the end of the year. The capital gains tax also applies to increases in the value of stocks and other securities, encouraging some investors to sell holdings that have done well. This is one of several factors cited in the recent plunge in the price of Apple shares. They have dropped 26 percent since mid-September after rising 73 percent earlier in the year.
The coming changes have not hurt all assets. Municipal bonds have become more attractive because they are exempt from most federal taxes, including the new surcharge related to President Obama’s health care law. Frank Fantozzi, a financial planner in Cleveland, is recommending that his wealthy clients increase their allocation to municipal bonds from around 30 percent to about 40 percent.
But the potential effect of the scheduled tax increases and government spending cuts has been mostly negative. Many market strategists have suggested trimming overall holdings of risky assets like stocks, and business executives are proceeding very cautiously.
Some business owners say they are holding off on hiring plans because they expect tax rates to rise. Dyke Messinger, chief executive of Power Curbers in Salisbury, N.C., said he would like to fill four slots at his construction equipment company but would only hire three people because he anticipated that his tax bill would rise by $100,000.
“It’s not a huge amount of money,” Mr. Messinger said. “But it’s enough money that you don’t want to make a misstep.”
This all happened because the KFC franchisee went bankrupt, and there are 21 more restaurants that it has closed down. Popeyes is currently trying to get approval to purchase the rest.
Carol Tice at Forbes calls it “a move that sums up the ascendance of one surging brand and the decline of another.”
But KFC’s not going to lie down and get beaten by Popeyes. The statement the company gave Tice is evidence that it’s going to try to put up a fight:
“KFC Corporation is intimately involved and intends to make every effort to see that as many restaurants as possible continue to operate as KFC restaurants with the same employee teams but under new ownership.”
Popeyes CEO Cheryl Bachelder made it abundantly clear in an interview with us in October that KFC’s not her prime concern. She wants to compete with the whole top five of the fast food segment, including McDonald’s and Wendy’s.
But, at their hearts, the bone-in chicken chains will always be archrivals, and Popeyes’ grab of all these dead KFCs has to be hitting a nerve.
Hockey fans and connoisseurs of fine cuisine will have something in common this fall – they will both have to wait. Just days after the NHL lockout was announced, more sad news has hit the press.
According to a memo obtained by Ad Age from McDonald’s Operators National Advertising Fund (OPNAD), the McRib will not be available until the latter half of December. McRib fans originally expected to get their annual dose of the venerable sandwich in October, but “after looking at ways to strengthen the fourth-quarter 2012 OPNAD calendar,” McDonald’s decided to delay its marketing window until December.
The company is looking for a strong December to follow up the 9.8% sales increase of December 2011, when many restaurants benefitted due to a milder-than-expected winter. While the McRib will be relied on to help December sales and the fourth quarter in general, McDonald’s facing another steep challenge in February, which posted a solid 11.1% increase in sales this past year. Ad Age sees Fish McBites as the hot new product for February