00:00 Speaker A
Names in the restaurant space are in focus this earnings season. McDonald’s reporting second quarter results on Wednesday, providing key insight into the industry for investors. McDonald’s posting a beat on the top and bottom lines and reversing its US sales slump. We’re navigating how to play the restaurant sector with the Yahoo Finance playbook. Joining right now, we’ve got Andy Barish, managing director of equity research at Jefferies. Andy, always good to see you. Um, so let’s start there with McDonald’s because they reported, Andy. Investors seem to like what they heard. I see the stock’s up here more than 3% in today’s trade. I know you like this stock, you’re a believer. What did you make of the print, Andy?
01:52 Andy Barish
Yeah, good afternoon, Josh. Thanks for having me again. Um, really solid and just kind of um, building layers and sustainability to the US same store sales. I I think was kind of the theme even if, um, the lower end consumer, you know, continues to not be great. Um, if McDonald’s is winning on on value and everyday affordable prices, they are going to be a share taker and we’ll continue to drive um, those solid, uh, and accelerating same store sales in the US, which should, um, continue to drive the stock higher.
03:02 Speaker A
You know, Andy, in my house, McDonald’s is a hit. You know, my six-year-old is is a fan. In terms of product momentum, does McDonald’s, Andy, have, you know, new product in the pipeline? Is there innovation coming that that’s going to excite that six-year-old?
03:43 Andy Barish
Yeah, this brand’s as relevant as it as it’s ever been and um, you know, you’re going to see, uh, in about a week or so, uh, kind of a nostalgic return to McDonald’s land and some of the characters that maybe you and I grew up with, the Grimace and the Hamburglar and some interesting, um, innovation around beverages, meal deals. Um, clearly the the chicken snack wrap that launched, uh, about a month or so ago has been performing very well at a 2.99 price point. Uh, we’ll probably see, um, you know, chicken Big Mac make its return in the fall. And yeah, a lot of innovation that, um, you know, continues to, um, focus on chicken primarily, but also, uh, potentially some beef items as well as beverage items that they’ll be testing, you know, as we work our way into the, um, the end of the year here.
05:18 Speaker A
You know, there’s a broader question, Andy, I had for you, um, relating to your space and and some of the names you cover, like a McDonald’s. When RFK Jr., Andy, was nominated and then approved to lead HHS, I there was a lot of hot talk, Andy, including, I I remember some analysts who came on this show, who said, you know, well, oh boy, you know, if if you are making salty, fried, delicious food, Andy, you might have some problems here. What what happened to all that? Was that ever a legitimate risk for investors?
06:42 Andy Barish
Not not really. That’s, you know, seemingly been focused on the food manufacturers and obviously certain areas like colorings and dyes and things like that. Um, restaurants, you know, did come into the, um, you know, the scope of, uh, the GLP1s, uh, two summers ago in the summer of 23 and there certainly was, uh, some impact on the stocks. Um, they did bounce back, you know, kind of that fall, but um, and we really haven’t seen any, um, noticeable changes in operational trends or anything as GLP1s now approach, I guess about 5% of the population. Um, so we’ll we’ll have to continue to monitor that, but no, the make make America healthy again has kind of kept, um, you know, kept away from the restaurant industry given the the choices and variety that restaurants provide. And, um, you know, the GLP1 saga will continue to see unfold, but, um, you know, overall chain restaurants continue to gain share and the category overall gain share in, um, in total food dollars when you include, you know, food at home and food away from home.
08:52 Speaker A
Andy, we talked McDonald’s. Here’s another name, Dutch Bros. Earnings on deck. Um, I’m curious what you expect to hear there, Andy, and why you say that one’s also a buy.
09:22 Andy Barish
Just a a company that’s really, um, had a great, um, concept and culture and now has kind of added to the management team and really built kind of sustainable sales layers that, um, are winning in the marketplace. Um, it’s focused on cold, convenience, um, customization and and most importantly maybe its broistas, as they call them, making connections with the guest and and and kind of brightening that that guest day in addition to, um, you know, serving them a a a fun customized drink. So I think the category has got a lot of growth and tailwinds. Dutch Bros is approaching the category in a way that continues to win and I think we’ll see, you know, a continued, uh, sort of beat and raise scenario tonight, um, as they’ve had a lot of momentum in the business and a lot of sales layers that should continue to drive, you know, good results. Some of the best unit growth in the category as well, um, you know, looking out to 2026 and beyond.
11:08 Speaker A
Andy, here’s another one. I need your take on. Very curious. Starbucks. There are a grand total, Andy, of just five sells on the street when it comes to that name. You’re one of them, Andy. How come? How come Starbucks is a sell here?
11:52 Andy Barish
Yeah, we we just think it’s been really hard to kind of get your arms around the numbers. There are no, um, guard rails or guidance just yet. Um, you know, we really respect Brian Nickel, but I think this, um, was a situation where a lot of the investment community kind of got a little bit excited ahead of any of the results and what’s become clear, uh, we initially downgraded the stock, um, and, you know, kind of went from 110 to 80. We upgraded it at 80 to a hold when it got back to 95. We went back to an underperform. And I I just think it’s it’s sort of expectations have gotten ahead of the reality that this is a a difficult, uh, foundational operational cultural turnaround that eventually will take place. It’s just needs to kind of, um, you know, build some, um, some, uh, baseline before you can kind of see this business grow again and we’re still kind of searching for what that earnings bottom may be. And when, you know, when you’re going through that, it’s just hard to value the company and hard to really, you know, kind of buy into the turnaround just yet.
13:56 Speaker A
Andy, always great to see you and to have you on the show. Thank you.
14:04 Andy Barish
Have a good one.