The Zacks Analyst Blog Highlights: Yahoo!, Facebook, Google, Microsoft and McDonald

Zacks


For Immediate Release

Chicago, IL – June 12, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Yahoo! Inc. (YHOO-Free Report), Facebook (FB-Free Report), Google (GOOG-Free Report), Microsoft (MSFT-Free Report) and McDonald Corp. (MCD-Free Report).

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Tuesday’s Analyst Blog:

Yahoo’s New Look Unveiled

Yahoo! Inc. (YHOO-Free Report) CEO Marissa Mayer recently unveiled the new look of the website. The redesigned website will comprise a navigation bar for Yahoo shortcuts at the top of the page with the search tab moving to the left-hand side margin.

The right side of the redesigned home page will feature a stack of capsules, which Yahoo calls “utilities”, dedicated to finance, sports, weather, video clips, Flickr for photo sharing and friends’ birthdays. Each of these can be customized or scrapped as per user preference. The left side of the page will display Yahoo services. Yahoo is also working on the structure of the website to considerably reduce loading time. The redesign is aimed at giving the site a cleaner and fresher look. 

Yahoo’s market position has deteriorated in the last few years as it lost its position in search and even its leadership in display advertising to Facebook (FB-Free Report) and Google (GOOG-Free Report). Engagement on its properties has also been on a decline. The design change is aimed at making the site more attractive so that users spend more time on the page.

According to a report by comScore, Google sites in the U.S. alone have 66.5% market share followed by Microsoft (MSFT-Free Report), which has 17.3%. As of Apr 2013, Yahoo had 12% market share. Thus, Yahoo has a long way to go to reclaim its lost market share.

Currently, Yahoo has a huge task at hand, which is to bring back its users and make them spend more time on its properties. If successful, Yahoo may reclaim some of its lost market share going forward. This would be crucial in bringing back advertisers as well. 

In the first quarter of fiscal 2013, Yahoo generated revenues of $1.14 billion, which were down 15.3% sequentially and 6.6% year over year. Traffic acquisition cost (TAC) was down 42.3% sequentially and 49.9% year over year. Excluding these costs in all periods, net revenue was down 12.5% on a sequential basis and 0.8% from last year, short of the consensus estimate.

Yahoo has a Zacks Rank #2 (Buy).

Is McDonald’s Back on Track?

After a dismal performance so far in the year, McDonald’s Corp.’s (MCD-Free Report) same-store sales (comps) increased in May as the world’s biggest burger chain witnessed positive comps growth in all three geographical segments – U.S., Europe and Asia/Pacific, Middle East and Africa (:APMEA).

Among the three, the U.S. segment led the positive momentum. Menu-innovations, value-options and breakfast offerings did the trick across the globe. The recent upside came as a pleasant surprise, although the rate of growth was lower than the year-ago level in the U.S. and Europe. The persistent global economic turmoil and peer pressure led to the year-over-year decline in comps.

Global comps grew 2.6% in May 2013 as against 0.6% decline in the previous month and 4.4% growth in the year-ago month. System-wide sales were up 3.6% and 5.2% in constant currencies in the month under review.

U.S.

In the United States, comps advanced 2.4% compared with 4.4% growth recorded in May 2012 and 0.7% growth in Apr 2013. Sustained focus on value menu, solid breakfast offerings, and a variety of chicken options bolstered the comps.

The new menu including Egg White Delight sandwich, which is a healthy breakfast offering and the premium chicken McWraps delighted consumers. Strategic expansion of its four pillars – chicken, beef, breakfast and beverages helped the Oak Brook, Ill.-based company drive sales.

Europe

In Europe, comps grew 2.0% compared to an increase of 2.9% in the year-ago period and a decline of 2.4% last month. Strong performances in UK and Russia were partially offset by a rather tepid show in Germany and France.

Summer-time promotions featuring premium burgers and specialty menu options in UK and Russia were the high points in the month. Also, value messaging and the breakfast lineup enjoyed their share of success.

APMEA

Unlike U.S. and Europe, growth in APMEA was meager with just 0.9% increase. However, on a year-over-year basis, comps bounced back from the last year’s decline of 1.7% and last month’s fall of 2.9%. Decent performance in a number of markets offset the avian flu-ridden weak Chinese performance. Japan was flat in the month as the country is still recovering from the aftermath of last year’s earthquake with consumers dining out less frequently.

Our Take

Although McDonald’s has been faltering for quite some time now due to fragile macro economy, changing eating habits and cutthroat competition, we still believe that the company has strong value. It is consistently striving to bounce back amid a challenging macroeconomic environment by resorting to value-proposition and menu innovation.

With two major regions including the U.S. and Europe gaining considerable growth momentum, things are looking up for McDonald’s. The burger chain is also taking every required step to score on profits as well. The recent elimination of the Angus burgers from the U.S. menu in the wake of escalating beef prices is such an attempt.

Currently carrying a Zacks Rank #4 (Sell), McDonald’s is slowly but steadily moving in a positive direction and might breeze past investor expectation in its second quarter of 2013, results of which are expected on Jul 22.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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