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Only a burger on the block: 3 hot fast food balances

There is no time when a burger doesn’t look so appetizing. Whether we’re talking about thicker patties or the growing number of vegetarian alternatives, burgers seem to strike the right balance between comfort food and value. Fortunately for investors, there are plenty of restaurant chains flipping burgers, and you don’t need a podcast to tell you where to find one.

With the economy fluctuating a bit at the moment, burger chains offer the ability to feed fickle bellies without breaking the bank. What investments can be appetizing right now? Let’s take a closer look at Shake Shack (Shak -3.52%)And the McDonald’s (MCD -1.56%)And the Beyond Meat (BYND -1.80%).

Image source: Getty Images.

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Shake Shack

The “best burger” trend has prompted a handful of chains to expand even deeper, but Shake Shack is a star in that field. There are now 395 Shake Shack restaurant locations worldwide, consisting of 230 company-owned local locations and 165 largely international licensed units.

Revenue was up 23% last quarter, driven by expansion (we were at 339 Shake Shacks a year ago) and a 10% increase in businesses. It broke even on an adjusted basis, but that was actually better than the small deficit analysts had expected. Shake Shack has beaten Wall Street’s quarterly earnings targets for more than a year.

The news is not all rosy. Shake Shack noted that growth slowed in June as inflationary pressures affected consumer spending habits. July did not improve, and guidance called for year-over-year sales growth to slow to between 14% and 17% for the current quarter. The comfort food quality of juicy burgers and custard shakes doesn’t match the slack. However, Shake Shack is still trying to grow in this challenging climate. It expects to open 35-40 company-operated restaurants and another 25-30 licensed restaurants. He also takes a page out of Chipotlanes’ playbook, adding driving lanes to new locations when possible. With the stock down about two-thirds since it peaked early last year, the upside is there if it can weather the storm.

McDonald’s

We can’t leave the world’s best burger chain behind. It also posted a 10% increase in businesses for the last quarter, but Mickey D’s took a different route to get there. Domestic sales from same-stores were up 4% for the three months ending in June, but that was stacked on top of a 26% increase a year earlier. The real growth came from abroad, with company-owned overseas locations and international licensed stores up 13% and 16%, respectively.

Revenue has fallen in six of the past eight years, but that doesn’t mean the golden arches are fading out in importance. McDonald’s delivers certain company-owned units to established franchisees. It weighs down the growth of the top line, but it does wonders for the margins. McDonald’s earnings per share have increased over the past eight years by 80%.

McDonald’s also rewards investors with some quarterly income in the form of dividend checks. A 2.2% return might not seem like much in this climate of rising savings account rates, but the yield has nearly doubled over the past decade. The chain has already boosted its payouts in 46 consecutive years, and that schedule has covered a fair share of the economic chaos. If you need more evidence of flexibility, keep in mind that while many fast-food stocks are unfavorable, McDonald’s is only 7% below their all-time highs.

Beyond Meat

Burgers are no longer just a herb for carnivores. Plant protein has evolved to the point where texture and even traces of beef burger flavor can be had without a cow, man. Beyond Meat isn’t a fast-food stock like Shake Shack or McDonald’s, but it’s a staple at many popular chains. Beyond Meat competes with Impossible for mindshare, but both have fairly strong representation. Chains that serve Beyond Burger products include Carl’s Jr. and TGI Fridays and BurgerFi.

Despite Beyond’s strong brand awareness, their inventory was a huge disappointment. Shares are down 93% — yes, 93% — since peaking shortly after their 2019 initial public offering.

Net revenue fell 2% last quarter. It’s no surprise to see what’s behind the meat wither. It saw its revenue fall 1% and rise 1% sequentially in two previous quarterly updates. Many food companies are dealing with higher prices, but Beyond Meat had to dump excess stock through liquidation channels at a discount, and it also had to make price cuts in Europe. It has already seen a 15% increase in total pounds sold for the period. The reduction should be temporary, but the red ink for the red meat substitute will take longer to crack. Analysts see Beyond Meat losing money through 2025. Still a popular brand at a historically low price.

Rick Munnarez has no position in any of the stocks mentioned. Motley Fool has positions at Beyond Meat, Inc. and recommend it. Motley Fool has a disclosure policy.