Filed under: Company News, Bank of America, McDonald’s, Earnings, Investing
There were plenty of winners and losers this week, with a car rental giant revealing that it will fall short of its earlier expectations and the leading Mexican fast food chain raising the stakes in the battle for hungry bargain seekers. Here’s a rundown of the week’s best and worst.
Hertz (HTZ) — Loser
Renting cars isn’t an easy gig these days. Auto rental giant Hertz announced that it will fall well short of earlier expectations, laying the blame on everything from weak demand for its equipment business to recalls getting in the way of its car supply. A couple of analysts lowered their ratings on the stock following the news.
The shares started to bounce back after billionaire activist investor Carl Icahn revealed that he has taken a stake in the company, but his intentions are sometimes radical. Hertz was already trying to split its business in two, suffering from the restatements and delayed financials accompanying the move. The last thing Hertz needs is another distraction.
GameStop (GME) — Winner
The video game industry is showing a lot of life these days, and GameStop, the dominant retailer, posted blowout quarterly results after Thursday’s market close.
Sales soared 25 percent relative to last year, fueled by a 21.9 percent spike in comparable-store sales. Hardware sales were naturally strong. The Xbox One and PS4 weren’t out a year ago. Even new software sales — something that’s been sluggish for years — came through with a double-digit increase. That’s huge, since software carries much higher margins than consoles. Analysts were seemingly aggressive in expecting earnings per share to double for the period, but profits per share soared 144 percent. Game on, Wall Street.
Bank of America (BAC) — Loser
Bank of America continues to pay the price for the misdeeds of Merrill Lynch and Countrywide, which helped trigger the subprime lending crisis that led to a global economic setback. The “too big to fail” bank is apparently not too big to settle. It paid what it thought were good prices at the time to buy those financial firms, and now it’s agreed to pay again — $16.65 billion in a settlement after a government investigation.
This should be the last of the major settlements for Bank of America, and that’s a good thing. However, the banking giant has reached nearly $80 billion in settlements as it tries to leave its unfortunate past behind.
Taco Bell — Winner
There have always been bargains to be had at Taco Bell, but Yum! Brands’ (YUM) fast Mexican food concept is giving it a stronger marketing message. Taco Bell introduced its Dollar Cravings menu this week, featuring 11 items that are all priced at a buck.
Burger chains have gone the dollar menu route, but now that Taco Bell has followed them into the breakfast business, it makes even more sense for Taco Bell to play up its one buck bargains. Many fast food chains have been struggling lately, but it has come through with positive comparable-store sales in nine of the past ten quarters.
McDonald’s (MCD) — Loser
Something tells me that McDonald’s teaming up with Kraft Foods (KRFT) to put out packaged coffee through grocery stores and mainstream retailers is going to go over as well as its recent Mighty Wings fiasco.
McDonald’s is hoping that its McCafe brand will be strong enough to help it sell packaged coffee beans and single-serve pods by early next year, but that dream seems far-fetched. Morning commuters settle for McCafe in the morning because it’s quick, cheap and convenient. It’ll be a harder sell in a crowded grocery store aisle when it’s pitted against premium brands.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Bank of America and McDonald’s. The Motley Fool owns shares of Bank of America, GameStop and Hertz Global Holdings. Try any of our newsletter services free for 30 days.
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Source: Investing
