Dashboard Capital Markets May 2023

May 1, 2023 | Dashboard, Restaurant Research

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Finally, Some Improving Trends for the Restaurant Space

It looks like we may get the promised “soft landing” for the restaurant industry as employed consumers continue to have some money to spend while restaurant operators are poised to enjoy some well-deserved margin relief.

Economic Outlook

  • Economic conditions look generally positive, marked by a strong job market with healthy disposable income growth to go with lower interest rates, lower gas prices, and moderating inflation.
  • However, rents remain a problem and we note stress among sub-prime (low-income) borrowers as reported by Equifax in this post (particularly as it relates to sub-prime car loans).
  • Recent reporting from McDonalds, Chipotle, Domino’s & BJ’s Restaurants reinforce these points.

Capital Markets Outlook

  • The theme of a healthy consumer (augmented by the prospect of recovering 2023 store-level margins as commodity costs moderate & menu price increases stick) is reinforced by QSR stock performance during April, with the median QSR stock up nearly +8% and over +11% for the YTD period through April 28, 2023.
  • FSR stocks did not fare as well in April as investors decided to take some of their substantial YTD profits off the table to rotate into a rebounding QSR sector.
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15 Second Posts

The Importance of the Balance Sheet in Financial Analysis

While most investors are focused on sales growth & margins, they would be well served to further consider the strength of a company’s balance sheet. We look at BlackRock’s financial condition as an illustrative point.

The Importance of Free Cash Flow in Financial Analysis

Cash represents the lifeblood of all business enterprises which is why it is important to analyze free cash flow which we define as operating cash flow minus capex, dividends, and stock buybacks. We illustrate DoorDash as an example of why cash flow analysis is so important. 

Lessons From Tucker Carlson

There are many theories about why Fox booted Tucker Carlson, but it may be a very simple reason which can instruct everyone involved in the consumer retail segment.

It is Imperative that Climate Change Regs Incorporate Economic Reality

This week we spotlight efforts by international agencies to lower the earth’s temperature by imposing onerous regulations on energy producers. We suggest it will be better to: begin a process of implementing continuous improvements designed to support both economic & climate progress; and use international organizations to share tech & best practices as opposed to providing them with regulatory powers best left to individual nation-states.   

Part 3 – It’s Nice for the US to Save the Climate, But What About the Rest of the World?

In our last 2 posts, we outlined the probability that the UN’s push to lower the world’s temperature by -2 degrees Celsius could drive significant U.S. energy price hikes & shortages. How is this going to help as Asia ramps up the use of coal? Can humans lower the earth’s temperature anyhow?

Part 2: Who is Left to Make Investments in Fossil Fuels & Clean Energy?

There is not a lot of incentive for profit-seeking companies to invest in demonized fossil fuels or in clean energy projects lacking ROI. This points to substantially higher energy prices and supply shortages that will have a profound economic impact.

Part 1: Ramping Energy Demand Clashes with UN’s Environmental Goals

From 2021 to 2050, ExxonMobil forecasts that 85% of the population growth will be driven by developing countries, which in turn, will drive a +15% increase in energy demand.

What if the Federal Government Was Turned into a 501c3 Non-Profit?

Given all the focus on the debt ceiling, we propose a thought experiment in which all 100 federal agencies must compete for charitable donations. If taxpayers get to choose for themselves what to fund, what might we learn? 

Like Sinatra Croons: “So you see it’s all up to you, you can be better than you are.”

The top-paid hourly workers are currently enjoying the fastest wage growth, indicative of the current challenge to recruit & retain a skilled labor force.

Switching Jobs Paid Big Time in April

While declining labor turnover was a common theme during the 1Q23 investor calls, wage data shows that there is still good reason for employees to job-hop.

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