CHICAGO, Sept. 8, 2014 /PRNewswire/ -- 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 the McDonald's Corp. (NYSE:MCD-Free Report), Yum! Brands, Inc. (NYSE:YUM-Free Report), Wendy's Company (Nasdaq:WEN-Free Report), CVS Health Corporation (NYSE:CVS-Free Report) and Alphatec Holdings, Inc. (Nasdaq:ATEC-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Friday's Analyst Blog:
Fast Food Strike Puts These Restaurant Stocks in Focus
Fast-food workers' strike demanding higher wages seems to be gaining momentum. Almost two years after workers reportedly staged their first strike in New York City, hundreds of fast food workers in more than 100 U.S. cities staged protests through strikes, rallies and acts of civil disobedience, reportedly, leading to some arrests.
The workers joined labor and union activists seeking wages of $15 an hour, more than double the current $7.25 and the right to union representation without reprisal. These strikes come at a time when U.S. Democrats are highlighting income inequality as a dominant problem ahead of this year's mid-term elections and are pushing to raise the federal minimum wage.
The minimum wage has been a factor of considerable debate in the recent past. In fact, President Obama sought to raise the federal minimum wage to $10.10 per hour from the current $7.25 in 2015. However, this directive is reportedly being intensely debated against by the Republicans in Congress.
However, a number of states have minimum wages above the federal minimum, which include 23 states and Washington, DC. In fact, Seattle and Chicago have raised their respective minimum wages to $15 and $13 an hour, which will be implemented by 2018, while San Diego raised it to $11.50 effective by 2017.
With the U.S. fast food industry already facing the brunt of intensifying competition and traffic slowdown due to tepid consumer spending trends, we list three stocks that would be most affected by the strikes:
McDonald's Corp. (NYSE:MCD-Free Report) has around 35,683 restaurants in 119 countries as of Jun 30, 2014. Among these, more than 80% were licensed to franchisees. Most of these franchises reportedly pay around $7-$8 per hour to their employees and the company stated that it does not set wages for its franchisees in the U.S.
Despite wages, which were far below $15 per hour, for the six months ended Jun 30, 2014, McDonald's paid 26% of its revenues as payroll & employee benefits. We believe McDonald's will be most affected by a hike in the minimum wage due to its elevated employee compensation expenses.
Another restaurant stock likely to face the brunt is Kentucky-based Yum! Brands, Inc. (NYSE:YUM-Free Report). For the first half of 2014, the company paid almost 19% of its revenues to payroll and employee benefits. Like McDonald's, almost 80% of Yum! Brands' restaurants are franchised.
A hike in the minimum wage would make it difficult for Yum! Brands to reap profits. This might prompt big price increases on their menus, which in turn might lead to lower comps. For, Yum! Brands, which is already facing dwindling comps in its U.S. segment for the past few quarters, this is really bad news.
Among other fast food chains, The Wendy's Company (Nasdaq:WEN-Free Report), which operated 6,545 restaurants as of Jun 29, will also be significantly impacted by these strikes. The company's restaurant labor costs accounted for 28% of its total sales in the second quarter of 2014 and will rise if the minimum wage is raised by the authorities.
We believe a $15 an hour wage would lead to a price hike at many fast-food chains. For the U.S. restaurant sector which is already battling increased commodity prices, a raise in wages will further stifle margins. This might force these operators to raise menu prices exorbitantly. If a wage hike takes place, restaurants might also cut down on the workforce and invest more in technology.
For an industry which depends more on students, immigrants and casual workers and less on skilled labor, a minimum wage hike might add to their already compounding problems.
CVS Health Gains Upon Leaving Tobacco Business
Share price of leading healthcare services provider CVS Health Corporation (NYSE:CVS-Free Report) – formerly known as CVS Caremark Corporation – inched up 0.7% since it announced the end of tobacco sales at all its CVS/pharmacy retail stores. The stock eventually closed at $80.31 yesterday.
On Sep 3, CVS Health reported the discontinuation of the sale of cigarettes and all tobacco products at all its CVS/pharmacy outlets – nearly a month in advance of the earlier targeted date of Oct 1, 2014. Per management, the strategic decision will promise a healthy life to all Americans akin to its corporate objective.
Withdrawal of tobacco products from retail pharmacies reportedly has a marked impact in reducing rates of smoking, which in turn is likely to ensure better overall health conditions and lesser tobacco-related deaths.
Evidently, a new study by CVS Health has demonstrated that withdrawal of tobacco products at retail pharmacies in San Francisco and Boston resulted in a 13.3% reduction in tobacco-buying customers.
In Feb 2014, CVS Health had declared that it would withdraw the sale of cigarettes and other tobacco products at 7,600 CVS/pharmacy stores across the U.S. by Oct 1. CVS/pharmacy is the first and only national pharmacy chain to initiate such an activity in the best interests of the well-being of its patients and customers. CVS Health has also started a robust and uniquely personalized national smoking cessation campaign to help U.S. citizens quit smoking.
The change of corporate name from CVS Caremark Corporation to CVS Health Corporation per the approval of the Board of Directors further reinforces its health and wellness commitments. However, the company's common stock will continue to trade on the New York Stock Exchange under the ticker symbol "CVS".
Currently CVS Health has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader medical sector include Alphatec Holdings, Inc. (Nasdaq:ATEC-Free Report), with a Zacks Rank #1 (Strong Buy).Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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