🍔 McDonald's Is Still The King

1) Top 10 Restaurants Ranked By Market Cap 2) Visa & Mastercard Dividend Growth, 3) The Cola Wars, and more!

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In today’s newsletter:

  • 🍔 Top 10 Restaurants Ranked By Market Cap

  • 💳 Visa & Mastercard’s Dividend Growth

  • 🥤 The Cola Wars

Let’s dive right in!

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🍔 Top 10 Restaurants Ranked By Market Cap

The restaurant industry is part of the broader consumer discretionary sector, where sales tend to be driven by economic health and consumer sentiment. Restaurants can range from quick-service to more fast-casual chains depending on the preferred atmosphere.

McDonald’s still holds the throne in the industry by having the largest market capitalization among restaurant stocks at $186.4B. Starbucks follows at second with $106.7B, and Chipotle at third with $52.7B. Over the last 5 years, Chipotle has been an incredible investment, with its stock returning roughly 300%.

Yesterday morning, McDonald's reported better-than-expected quarterly earnings and revenue. Earnings were $3.19 per share compared to the anticipated $3, with a revenue of $6.69B against the expected $6.58B. The company's revenue increased by 14%, and global same-store sales grew by 8.8%, surpassing estimates. In the U.S., sales grew by 8.1% due to price hikes, marketing strategies, and a boost in digital and delivery orders.

Investors will look to see if McDonald’s can continue to drive higher revenue, as among the top 12 restaurant stocks, it has the lowest 5 year average revenue growth. Meanwhile, Wingstop, Shake Shack, and Chipotle have among the highest revenue growth rates on the list.

💳 Visa & Mastercard Dividend Growth

Last week, both Visa and Mastercard reported earnings, beating analyst estimates. Visa announced it would be raising its quarterly dividend by 16% and approved of a $25B buy back program. Back in December, Mastercard also hiked their dividend by 16% and announced a $9B buy back program. Both companies are continuing to reward shareholders with dividend increases and buybacks.

Dividend growth is a key metric all investors should track. Companies that pay dividends offer a consistent income stream, making them especially appealing during volatile market periods. This steady return not only provides immediate benefits but, when reinvested, can compound and significantly boost long-term gains.

Moreover, a pattern of rising dividends often signals a company's robust financial health and its confidence in future earnings potential, as is the case in Visa and MasterCard. Both companies are demonstrating their commitment to returning value to shareholders.

🥤 The Cola Wars

Both Coca-Cola and Pepsi have a long-standing rivalry, and this quarter, Coca-Cola had the edge. Despite both companies surpassing Wall Street’s estimates for the third quarter, only Coca-Cola reported growth in volume, with a 2% overall volume growth. Meanwhile, PepsiCo’s beverage volume remained flat and its food volume declined by 1.5%.

Coca-Cola’s recent success can be linked to several different factors. These include a more effective pricing strategy, a significant portion of sales from dining out, a more substantial international market presence, and a different approach to bottling their beverages. While Coca-Cola collaborates with independent bottlers, PepsiCo owns a majority of its bottling operations in North America. This requires Pepsi to allocate resources and capital to bottling, which has seen a drop in demand for close to 2 decades now.

Moving forward, both companies will look to fend off concerns around weight-loss drugs. Recently, shares of both companies declined after Walmart's U.S. CEO, John Furner, said that drugs like Ozempic and Wegovy led customers to purchase fewer high-calorie groceries. The full impact of these weight-loss drugs is something that will definitely be tracked closely over the next few years.

📉 $34B Loss. Norway's $1.4 trillion wealth fund reported a $34B loss in Q3. [CNBC]

🔥 PCE Increase. The core PCE index rose 0.3% in September, reaching a four-month high due to increased consumer spending. [BB]

🍎 $1B AI Investment. Google $GOOGL is investing up to $2B in AI company Anthropic. [WSJ]

☣️ Uranium Surge. Hedge fund managers are increasing investments in uranium stocks, anticipating significant price hikes due to rising demand. [BB]

Notable Companies Reporting Earnings This Week:

  • Monday:

    • HSBC $HSBC, McDonald’s $MCD, Arista Networks $ANET, ON Semi $ON, Simon Property $SPG, Pinterest $PINS

  • Tuesday:

    • Pfizer $PFE, AMD $AMD, Caterpillar $CAT, Stellantis $STLA, Ecolab $ECL, Global Payments $GPN, Paycom $PAYC

  • Wednesday:

    • Qualcomm $QCOM, CVS $CVS, Airbnb $ABNB, MercadoLibre $MELI, PayPal $PYPL, Electronic Arts $EA, DoorDash $DASH, Palantir $PLTR

  • Thursday:

    • Apple $AAPL, Eli Lilly $LLY, Novo Nordisk $NVO, Starbucks $SBUX, Shopify $SHOP, Monster Beverage $MNST, Palantir $PLTR

  • Friday:

    • Enbridge $ENB, Sempra $SRE, Dominion Energy $D, Gartner $IT, Restaurant Brands International $QSR

All of the companies that are reporting earnings this week can be viewed here.

Major Trades Published Week of 10/23. Trades may be those of family members. [Source: 2iQ]

Buys:

  • Bob Latta (R)

    • Company: Farmers & Merchants Bancorp ($FMAO)

      • Amount Purchased: $1K - $15K

Sells:

  • James Vance (R)

    • Company: Walmart ($WMT)

      • Amount Sold: $50K - $100K

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