Apple, McDonald's, Denny's, Sonic and Cracker Barrel Old Country Store highlighted as Zacks Bull and Bear of the Day

News provided by

Dec 23, 2014, 09:30 ET

CHICAGO, Dec. 23, 2014 /PRNewswire/ -- Zacks Equity Research highlights Apple (Nasdaq:AAPL-Free Report)as the Bull of the Day and McDonald's (NYSE:MCD-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis onDenny's Corporation (Nasdaq:DENN-Free Report), Sonic Corp. (Nasdaq:SONC-Free Report) and Cracker Barrel Old Country Store, Inc. (Nasdaq:CBRL-Free Report).

Here is a synopsis of all five stocks:

Bull of the Day:

With Christmas fast approaching, one company that is definitely on a lot of consumers' minds is undoubtedly Apple (Nasdaq:AAPL-Free Report). The computing giant's iPhones, iPads, and computers are favorite gift items for many, and will definitely be waiting under the tree for some lucky people on the 25th.

Yet investors might also want to consider adding Apple to their portfolio wish lists for the New Year. This is because Apple appears to be positioned for another surge in the 2015 thanks to its solid brand name, a rising consumer market, as well as a new product launch. Let's take a closer look at some of these positive developments below:

As the ultimate consumer discretionary company, Apple stands to benefit from surging consumer confidence and increased levels of disposable income. Confidence levels are at a post-Great Recession highs, while the crash in oil prices is putting extra money in everyone's pockets.

Apple looks to take advantage of this in 2015 thanks to its already solid line-up of in-demand products and its normal refresh cycle. However, there are plenty of fresh opportunities on the horizon including possible developments on the Apple TV and iTunes fronts, as well as the release of the Apple Watch.

The Apple Watch is expected to sell at least eight million units, while some analysts are looking for 10 million units as a possible sales figure. While it is true that this is unlikely to move the needle too much for the company, let's consider that it opens up a new product category for Apple and that we shouldn't underestimate the company or its marketing machine at this point. After all, many were wrong about the impact of the iPhone and especially the iPad, so it will be interesting to see what Apple can do with its newest potential gamechanging product.

Let's also not overlook Apple Pay system as this slowly reaches a critical mass. The mobile payments world is one with massive potential and Apple, thanks to the incredible number of iPhones out there, stands to capture a chunk of this space too, further diversifying its revenue stream. Again, this isn't likely to be a huge driver in the near term, but just the like the watch, it has strong potential to help down the road.

Bear of the Day:

It seems like every day there is a new burger startup. Companies are springing up in this space all over the country, and they are eating into the market share of traditional burger giant McDonald's (NYSE:MCD-Free Report).

MCD is being left in the dust by a number of upstarts that are either offering arguably better burgers with more choices, or by restaurants that feature healthier ingredients. McDonald's has tried to revitalize its brand in recent months, but it has little luck overall. Instead, the company continues to flounder, and looks to remain in trouble thanks to the uncertain direction MCD will head in next.

One of the main problems for MCD right now is its lack of focus. The company is trying to go in too many different directions and its menu has become bloated as a result. Many of these new items are premium ones too, moving the company away from its low-cost roots.

However, consumers no longer associate MCD with either low costs or speed, two of the top reasons for going to McDonald's for many. With such a huge menu, staffs are having a difficult time keeping up, and especially so for a relatively high employee turnover business segment. And with a new lineup of premium chicken and beef focused products, not to mention items in the coffee and breakfast markets, it has lost its low cost appeal too.

This struggle comes at the worst possible time for MCD as everyone seems to be jumping into the burger game, assaulting McDonald's position from all angles. And then there are traditional rivals, like Burger King, which are also doing a much better job lately, and have found more success in establishing a turnaround.

Additional content:

3 Restaurant Stocks that Surged in 2014

An improving economic scenario bodes well for the restaurant industry. These stocks have gained over the year and are poised for the further gains next year. Falling oil prices, lower food inflation and an improving labor market have combined to create an environment which is favorable for the sector.

GDP and Employment

GDP numbers bounced back in the second and third quarters, increasing by 4.6% and 3.9% (second estimate). Real personal consumption expenditure fueled growth on both occasions. GDP had contracted 2.9% in the first quarter of 2014. This was the worst performance in five years.

Additionally, the economy added the most number of jobs in November since Jan 2012. The economy also added a minimum of 200,000 jobs for 10 straight-months in November. This turned out to be the longest stretch in more than 30 years.

Also, the average hourly earnings of American workers increased 0.4% in November, more than the consensus estimate of a rise by 0.2%. Investors also focused on the other part of the data that showed unemployment rate remained at a six-year low of 5.8%.

Falling Oil Prices

For the last six months, crude prices have continued to move lower. The decline in oil prices was a result of Saudi Arabia's decision to cut its supply price to U.S. customers in the face of abundant North American output. Experts believe that this move is aimed at Saudi Arabia trying to keep its market share in the U.S. while cutting down competitive pressure.

Brent crude price has slumped more than 48% since Jun 19. On Dec 16, Brent crude lost 2% to settle at $59.86 a barrel, its lowest level since May 19, 2009. On Dec 11, WTI Crude Oil had slumped 1.7% to settle at $59.95, its first drop below the $60 mark in five years.

Historical trends indicate that a continual fall in oil prices is beneficial for the restaurant sector. Along with the increase in employment and income, the slump in oil prices significantly increases the purchasing power of the consumer. Besides, the drive to a restaurant also becomes that much cheaper.

Lower Food Inflation

The Consumer Price Index (CPI) dropped 0.3% in November, witnessing its biggest decline since Dec 2008. The rate of decline was also wider than the consensus estimate of a 0.1% drop. Negative trend in oil prices seems to be the main reason behind this decline.

Meanwhile, corn and hog prices are expected to fall further. In September, corn futures slumped to their lowest level in five years. According to the USDA, corn prices are expected to move below $4 a bushel during the second half of next year and through 2016. This will result in a fall in the cost of feed and lower food costs overall. According to John Barone, president of Market Vision Inc., hog prices are expected to decline nearly 14.5% in 2015.

Our Choices

Below we present three stocks which will gain from these trends, each of which also has a good Zacks rank and strong year-to-date returns.

Denny's Corporation (Nasdaq:DENN-Free Report) is the owner and operator of the Denny's restaurant brand. The company has around 1,700 restaurants as of Feb 5, 2014. This includes, company owned, licensed and franchisee outlets as well as 100 restaurants in foreign countries. Denny's is based out of Spartanburg, SC.

Denny's holds a Zacks Rank #2 (Buy) and has expected earnings growth of 18.5%. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 26.83. The stock has gained 37.1% year-to-date.

Sonic Corp. (Nasdaq:SONC-Free Report) is the operator and franchiser of the Sonic Drive-Ins restaurant chain. The company operated around 3,518 Sonic Drive-In outlets across 44 states as of Aug 31, 2014. This includes 301 company-owned outlets. Sonic is based out of Oklahoma City, OK.

Apart from a Zacks Rank #2 (Buy), the company has current year expected earnings growth of 18.8%. It has a P/E (F1) of 26.10x. The stock has gained 29% year-to-date.

Cracker Barrel Old Country Store, Inc. (Nasdaq:CBRL-Free Report) is the developer and operator of the Cracker Barrel Old Country Store concept. These stores combine a restaurant with a gift shop and offer home style cooking for breakfast, lunch and dinner. The company operated 633 company-owned outlets as of Sep 18, 2014. Cracker Barrel is based out of Lebanon, TN.

Cracker Barrel holds a Zacks Rank #2 (Buy) and has expected earnings growth of 9.3%. It has a P/E (F1) of 21.87x. The stock has gained 22.3% year-to-date.

Higher growth and an improving labor market are good signs for the restaurant sector. A slump in fuel prices and the possibility of lower food inflation is also good news for such companies. Given these factors, adding these stocks to your portfolio would be a prudent choice.

Get today's Zacks #1 Stock of the Day with your free subscription to Profit from the Pros newsletter:

About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About the Analyst Blog

Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Click here to subscribe to this free newsletter today.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.

Get the full Report on AAPL - FREE

Get the full Report on MCD - FREE

Get the full Report on DENN - FREE

Get the full Report on SONC - FREE

Get the full Report on CBRL - FREE

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

[email protected]

http://www.zacks.com

Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Logo - http://photos.prnewswire.com/prnh/20101027/ZIRLOGO

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/apple-mcdonalds-dennys-sonic-and-cracker-barrel-old-country-store-highlighted-as-zacks-bull-and-bear-of-the-day-300013604.html

SOURCE Zacks Investment Research, Inc.