For Immediate Release

Chicago, IL – December 11, 2014– Zacks Equity Research highlights Michaels Companies (MIK-Free Report) as the Bull of the Day and Carmike Cinemas (CKEC-Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Yum! Brands, Inc. (YUM-Free Report) and McDonald's Corp. (MCD-Free Report).

Here is a synopsis of all four stocks:

Bull of the Day:

The Michaels Companies (MIK-Free Report) delivered a solid "beat and raise" on November 20. Sales and EPS both came in above consensus estimates, and management raised its full year guidance. This prompted analysts to raise their estimates for both 2014 and 2015, sending the stock to a Zacks Rank #1 (Strong Buy).

Given its strong earnings momentum, and with shares trading around 14x forward earnings, Michaels offers investors attractive upside potential.

The Michaels Companies is a specialty retailer focused on arts and crafts. The company owns and operates 1,166 Michaels stores in 49 states and Canada and 121 Aaron Brothers stores. It has a market cap of $4.7 billion.

Michaels delivered better-than-expected third quarter results on November 20. Earnings per share came in at 31 cents, beating the Zacks Consensus Estimate by 5 cents. It was a 19% increase over the same quarter last year.

Net sales rose 1% to $1.13 billion, ahead of the consensus of $1.11 billion. Same-store sales slid 0.8% as the company lapped the hugely popular Rainbow Loom product in the same quarter last year. This was much better than analysts were expecting.

Gross profit declined from 40.5% to 40.0% of net sales due to slightly lower product margins, higher occupancy costs, and investments in e-commerce. However, selling, general and administrative expenses declined from 28.4% to 27.4% of net sales due to lower performance-based compensation and payroll taxes.

Bear of the Day:

Earnings estimates have been plummeting for Carmike Cinemas (CKEC-Free Report) following disappointing Q3 results.

The movie theater company experienced a big drop in attendance last quarter due in part to a weak domestic box office. This led to declining profit margins and negative earnings estimates revisions. Carmike is a Zacks Rank #5 (Strong Sell).

And while shares have sold off heavily recently, they still do not look like a value at 25x forward earnings.
Carmike Cinemas is a motion picture exhibitor with 278 theatres in 41 states. It is headquartered in Columbus, Georgia and has a market cap of $653 million.

Carmike reported disappointing third quarter results on November 4. Adjusted earnings per share came in at a loss of $0.19, well below the Zacks Consensus Estimate of +$0.02. It was also significantly below EPS of +$0.16 in the same quarter last year.

Total operating revenues declined 1% year-over-year to $162.6 million despite 13% more screens on average in the quarter due to an acquisition. This missed the consensus of $168.0 million. Admission revenue fell 2% due in part to a weaker-than-expected domestic box office. This was somewhat offset by 1% growth in Concessions & Other, which accounted for 38% of total operating revenues in the quarter.

Additional content:

Yum! Brands Slashes Again on China Woes

Yum! Brands, Inc.’s (YUM-Free Report) problems in China seem to be far from over. The company has slashed its earnings per share estimate for 2014 for the second time this year. The company now estimates this year’s earnings per share to grow in mid single-digit range, versus prior expectation of 6–10% growth. Earlier, in October, during its third-quarter earnings call, the company slashed its earnings forecast from 20%

Yum!’s comps in China has been constantly declining ever since local Chinese television media uncovered a scandal in July blaming workers at Shanghai Husi Food Co. — unit of U.S.-based OSI Group LLC — of reusing meat that had fallen on the factory floor as well as mixing fresh and expired meat. Notably, Shanghai Husi supplied meat to both KFC — a division of Yum! — and McDonald's Corp. (MCD-Free Report) in the Shanghai region.

As Chinese regulators started investigating Shanghai Husi, Yum! Brands reportedly apologized and announced a change in meat suppliers. Reportedly, the Shanghai Food and Drug Administration also shuttered Shanghai Husi’s operations. However, the damage had already been done.

Although sales have improved since then, the recovery has been slower than expected. The company expects its China Division comps to decline by mid single-digits in 2014.

However, Yum! has a brighter view for 2015. The company anticipates that it will deliver earnings growth of 10% or more, depending on the sales recovery in China. Further, profit in the China division is expected to be at least 15%. Both the KFC and the Pizza Hut Divisions are expected to post operating profit growth of 10%, while the Taco Bell Division is expected to record operating profit growth of 6%.

Management believes that the makeover of the Pizza Hut division along with the sales momentum at the KFC and Taco Bell divisions will drive earnings growth. Further, the company is focusing on extensive menu innovation to drive comps at its restaurants.

Yum! is also betting on international expansion to improve its top line. In 2015, the company plans to open over 2,100 international outlets, including 700 units in China, 125 units in India, 700 KFC units and 600 Pizza Hut units. The company plans to open 150 units under the Taco Bell Division. Global capital expenditures are expected to be roughly $1.2 billion.

Yum! Brands currently has a Zacks Rank #3 (Hold).

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