Chipotle Mexican Grill, Inc. (CMG), McDonald’s Corporation (MCD) & Yum! Brands, Inc. (YUM): Perk up Your Portfolio With These Restaurant Companies

Showing signs of improvement

Yum! Brands, Inc. (NYSE:YUM) reported mixed results in its recent second-quarter earnings. Revenue of $2.904 billion was less than the expected $2.92 billion, but EPS of $0.56 beat analysts’ expectations of $0.54. Its China SSS are recovering, especially at KFC, which covers 75% of the 6,000 Yum! Brands, Inc. (NYSE:YUM) restaurants in China.

KFC sales in China have fallen since December due to safety violations among KFC’s chicken suppliers coupled with a series of avian flu cases in the spring. However, this pressure has eased to a 10% SSS drop in June, from 19% in May and 29% in April. I expect this pressure to continue to reduce in the fourth quarter with strong a bounce-back year in 2014.

The company is doing well in its U.S. operation where its SSS increased 1% due to a 2% growth at Taco Bell, driven by its innovative products, Doritos Locos Tacos and Cantina Bell. Taco Bell currently contributes about 60% of the company’s U.S. operating profit, and therefore it will open around 80 new restaurants by the end of 2013. The company sold 100 million Doritos Locos Tacos during the second quarter, and it continues to be one of the most successful new product launches in Taco Bell’s history.

Investors take

New growth ideas like ShopHouse, catering, and increased alcohol sales will help Chipotle Mexican Grill, Inc. (NYSE:CMG) to increase its SSS. McDonald’s Corporation (NYSE:MCD) looks promising due to improved SSS in the U.S. and strong dividend history. Recovery in KFC’s SSS in China and continued growth from Taco Bell in the U.S. makes Yum! Brands, Inc. (NYSE:YUM) an attractive option for your portfolio.

I recommend buying Chipotle Mexican Grill, Inc. (NYSE:CMG), McDonald’s, and Yum! Brands, Inc. (NYSE:YUM) for long-run growth.

The article Perk up Your Portfolio With These Restaurant Companies originally appeared on Fool.com.

Ranu is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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