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While last week was a great week for restaurant stocks, the looming cloud of food costs must be accounted for.

Quick service and casual dining stocks climbed 2.5% and 3.4%, respectively, over the week ended Friday.  Important news items going into this week include:

  • McDonald’s is bringing back the McRib on November 2nd for six weeks.  This is in line with MCD’s continuing approach of taking on competitors head on.  Its recent release of the burrito-sized Chicken Snack Wrap was clearly aimed at the Chipotle customer. Burger King has seen recent success with its “Fire-Grilled Ribs” and MCD will look to gain a share of that success with the McRib release.
  • Dine Equity signed a new $950 million senior secured credit agreement. 
  • Brinker International’s stock could climb about 25% in the next year, according to Barron’s article published this past weekend.
  • Surging corn and meat prices are driving costs higher for U.S. retailers.  The U.S. cattle herd in July was the smallest since 1973.  Beef is more costly at current prices than it has been in 25 years. 

TALES OF THE TAPE - stocks 1011


Howard Penney

Managing Director