MCD Preview: Bring Your Happy Meal

McDonald's (MCD - commentary - Cramer's Take), far and above my favorite (and the best-managed) restaurant company, is scheduled to report its second-quarter results before the market opens on Wednesday and follow up with its quarterly corporate conference call after lunch. Bring your Happy Meal along for the conference call, as the company is expected to earn 86 cents per share on revenue of $5.92 billion.

In the year-ago quarter, McDonald's earned 71 cents per share on revenue of $6.01 billion. The year-over-year drop in revenue is deceptive since the company has converted many restaurants, especially in Latin America, from company-owned to franchisee-operated.

Global comp sales rose 5% in April and 7.7% in May. The June and quarterly sales data is expected to be released with the earnings report. I am expecting McDonald's to have a strong June in the U.S. and abroad as well. Just as a gauge, the smaller and domestic-only competitor, CKE Restaurants (CKR - commentary - Cramer's Take), reported same-store sales increases of 5.2% in the four-week period ended July 14.

As far as corporate actions, McDonald's is not scheduled to raise its dividend for another quarter. I expect that announcement to occur at the August board meeting. Recall that the company moved its payout from an annual basis to quarterly basis earlier this year. I would not rule out a surprise increase in the share repurchase program this quarter or later in the year as cash flow is extremely strong. In any case, we will get updates on the company's return of capital to shareholders.

We need not lose sight of the fact that McDonald's operates in an environment of rising commodity costs, both food and energy. The company has been able to control and overcome these costs and should provide an update as part of the quarterly conference call.

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At the time of publication, Rothbort was long McDonald's, although positions can change at any time.

Scott Rothbort has over 20 years of experience in the financial services industry. In 2002, Rothbort founded LakeView Asset Management, LLC, a registered investment advisor based in Millburn, N.J., which offers customized individually managed separate accounts, including proprietary long/short strategies to its high net worth clientele. He also is the founder and manager of the social networking educational Web site TheFinanceProfessor.com.

Immediately prior to that, Rothbort worked at Merrill Lynch for 10 years, where he was instrumental in building the global equity derivative business and managed the global equity swap business from its inception. Rothbort previously held international assignments in Tokyo, Hong Kong and London while working for Morgan Stanley and County NatWest Securities.

Rothbort holds an MBA in finance and international business from the Stern School of Business of New York University and a BS in economics and accounting from the Wharton School of Business of the University of Pennsylvania. He is a Term Professor of Finance and the Chief Market Strategist for the Stillman School of Business of Seton Hall University.

For more information about Scott Rothbort and LakeView Asset Management, LLC, visit the company's Web site at www.lakeviewasset.com. Scott appreciates your feedback; click here to send him an email.