1Q16 earnings comparison
Now that most 1Q16 earnings have been released, it’s time to analyze restaurant companies’ performances compared to the performances of their peers. Based on the type of service they provide, restaurants are classified into six categories:
- fast food
- casual dining
- fast casual
- family dining
- café restaurants
In this series, we’ll focus on fast food and pizza restaurants. You can also read about fast casual restaurants in the series Fast Casual Restaurants Struggled in Early 2016.
Fast-food and pizza restaurants
Fast food restaurants serve food that can be prepared and served quickly. They usually do not offer table services, and items on the menu are limited. Pizza companies are focused on takeaway or home delivery orders and generally have a limited seating space.
In this series, we’ll be looking at the 1Q16 performances and key financial indicators of the following restaurants:
- McDonald’s (MCD): a fast-food restaurant, headquartered in Oak Brook, Illinois, that sells hamburgers and went public in 1965
- Domino’s Pizza (DPZ): a pizza restaurant chain, headquartered in Ann Arbor, Michigan, that also provides delivery service
- Papa John’s (PZZA): a take-out and pizza delivery restaurant chain, headquartered in Jeffersontown, Kentucky
- YUM! Brands (YUM): a company that operates Pizza Hut, Taco Bell, and KFC brands, headquartered in Louisville, Kentucky
- Wendy’s Company (WEN): a fast-food restaurant chain, headquartered in Dublin, Ohio, that sells hamburgers, chicken sandwiches, and french fries
- Restaurant Brands International (QSR): a Canadian fast-food company, headquartered in Oakville, Ontario, that owns Burger King and Tim Hortons
- Sonic (SONC): a fast-food restaurant chain, headquartered in Oklahoma City, Oklahoma, with hamburgers and French fries as its main menu items
- Jack in the Box (JACK): a fast-food company that owns Jack in the Box, which serves hamburgers and cheeseburgers, and Qdoba Mexican Grill
Compared to fast casual restaurants, fast-food and pizza companies have yielded higher returns in last five months. Year-to-date, fast-food and pizza companies have, on average, returned 6.3%, as compared to -9.5% of fast casual restaurants. Since the beginning of 2016, Papa John’s, Jack in the Box, YUM! Brands, and Domino’s Pizza have delivered returns of 15.1%, 13.9%, 12.5%, and 11.8%, respectively.
But Sonic and Wendy’s struggled in 1Q16, with their share prices declining by 7.2%, and 5.8%, respectively. By comparison, Restaurant Brands International (QSR) and McDonald’s returned 7.2%, and 3.3%, respectively.
Notably, during the same period, the share price of the broader comparative index, the Guggenheim S&P 500 Pure Growth ETF (RPG), increased by 1.1%. RPG has 44% of its total holdings invested in travel and restaurant companies.
Now let’s examine the driving factors behind the majority of fast-food restaurant stocks in 1Q16.