Sector Shift: McDonald's Peers May Finally Be More Attractive (MCD, YUM, WEN, JACK, CMG)

Economic uncertainty, higher food costs, and higher labor costs… Those are not usually supposed to be a worry for the likes of McDonald’s Corporation (NYSE: MCD).  After all, it has proven to be the king of all defensive stocks and it has gone on to outperform most fast food restaurant chains by far.  The negative reaction in shares of McDonald’s did not really spill over into the shares of its peers on Thursday.  This makes us wonder at least a bit after seeing a full day’s trading about whether or not the McDonald’s growth story is peaking ands whether or not prospects might be better off in the shares of its competitors.

McDonald’s went on to warn that the challenges are expected to impact the company’s first-quarter operating income growth.

Yum! Brands, Inc. (NYSE: YUM) is up 0.8% at $67.06 against a prior 52-week trading range of $47.15 to $66.65.  Call that a new high!  The Wendy’s Company (NYSE: WEN) is up 0.6% at $4.82 against a 52-week trading range of $4.29 to $5.62. Jack In The Box Inc. (NASDAQ: JACK) is up 0.6% at $23.21 against a 52-week trading range of $18.25 to $24.59.

Chipotle Mexican Grill, Inc. (NYSE: CMG), a former McDonald’s brand, is actually up 1.7% at $398.71 on the day and that is a new all time high as well.

With McDonald’s shares down 3.2% at $96.99, it sure seems as though there may be concern that McDonald’s may not have the ability to endlessly grow its earnings and revenues at the same rate indefinitely through good times and bad.  Keep in mind that the market value here was over $100 billion before today’s drop. Yum’s value was approaching $30 billion and Chipotle’s value was approaching $12.3 billion.

JON C. OGG