McDonald’s Corporation (MCD), Yum! Brands, Inc. (YUM), Wal-Mart Stores, Inc. (WMT): The Downside of Falling Unemployment

Education

The unemployment rate for college educated workers is significantly less than that of less educated workers. Apollo Group Inc (NASDAQ:APOL) offers a number of for-profit education programs to help unemployed and under-employed workers. A combination of regulatory challenges and falling unemployment rates pose substantial challenges for the company.

The for-profit education sector depends on government handouts and more than 100% of Apollo Group Inc (NASDAQ:APOL)’s 2012 operating income came from Federal Aid Programs. The company faces tough competition from state funded community colleges with very good deals for local residents. Year-over-year the company’s 2013 second quarter and first quarter aggregate degree enrollment rate fell by 14.5%. If current trends continue, its 8.9% profit margin will only fall.

Conclusion

As the economy improves Apollo Group Inc (NASDAQ:APOL) is one company that ought to be avoided as it is dependent on fickle government handouts to keep its operations going. Wal-Mart Stores, Inc. (NYSE:WMT) is facing challenges in the U.S. as the economy improves, but its dominant position and world class infrastructure should allow it to maintain its power. Yum! Brands, Inc. (NYSE:YUM) and McDonald’s Corporation (NYSE:MCD) are facing difficulties as fewer people eat-down in fast food restaurants. Regardless, McDonald’s Corporation (NYSE:MCD) has fat 44.5% gross margins and is a dependable dividend payer.

The article The Downside of Falling Unemployment originally appeared on Fool.com and is written by Joshua Bondy.

Joshua Bondy has no position in any stocks mentioned. The Motley Fool recommends McDonald’s. The Motley Fool owns shares of McDonald’s. Joshua 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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