Morgan Stanley Comments On Fast Food Industry Ahead Of Q2 Earnings

In a note issued July 9, Morgan Stanley analyst John Glass shed some light on the fast food sector heading into earnings season.

Glass is expecting solid comparables in both quick service restaurants and fast casual. He still has concerns, however, for some commodities, noting a 25 percent year-to-date rise in the cost of hamburger. He added that it is likely fast casual will lead restaurants again.

Company highlights from the note include:

Yum! Brands YUM - reports July 16

Glass is slightly above consensus and is predicting a 28.5 percent year-over-year increase in EPS to $0.73. He is looking for the company to beat on margins, especially in China. Glass is also expecting six percent comp growth for Taco Bell, driven by the roll out of its breakfast line.

McDonald's MCD - reports July 22

Glass is in-line with consensus EPS estimates and is not anticipating the second quarter to be a catalyst for the company. However, at $700 million, he is above consensus ($557 million) estimate for share buybacks. Additionally he said McDonald's re-franchising plans are still lacking "fundamental traction."

Starbucks SBUX - reports July 24

Glass is $0.01 above the $0.65-0.66 EPS guidance and said the comp expectations of five percent "appear achievable." For 2015, he thinks 15 to 20 percent comp growth is "reasonable."

Panera Bread PNRA - reports July 29

Glass is in-line with the consensus of $1.75 for EPS, but is slightly higher on comps at 2.2 percent vs. 1.8 percent.