With this report, we update our Q2E same-store sales forecasts for both brands owned by Dine Brands (DIN; Buy).
Earlier today, McDonald’s (MCD; Buy) reported its Q1 EPS of $1.72, above our $1.71 forecast, but below the sell-side consensus of $1.75. But the real story is that U.S. same-store sales rose by an unexpectedly robust +4.5%, easily surpassing our above-consensus +3.2% projection. McDonald’s attributes the strong showing to “successful promotions, including the Bacon Event, the 2 for $5 Mix and Match deal, and Donut Sticks, as well as a net positive impact from our Experience of the Future deployment.” On this latter front, management noted on today’s conference call that this is the first time ever that it can make this statement. We look for this effect to continue in coming quarters.
Ahead of Yum Brands’ (YUM; Buy) first-quarter earnings release — scheduled for before the market open on Wednesday, May 1st — we look at a key positive and a key risk surrounding YUM. Most importantly on the positive side of the ledger, based on our data-driven checks, we raise our Q1 same-store sales forecast for Taco Bell by one percentage point, to +5%, as we believe that brand’s momentum, innovation, and differentiation continue to pay off. Promotions during various parts of the first quarter included Steak Rattlesnake Fries, the Steak Rattlesnake Burrito, the return of the Naked Chicken Chalupa, and the return of Nacho Fries. Our Q2E same-store sales forecast is also boosted by one percentage point, to +4%, and that is not a bestcase scenario if the second quarter trends well. We’ll see…