MCD Stock: Burger King (BKW) and JACK Are Eating Your Lunch

McDonald’s Corporation (MCD) stock is off more than 3% on Monday after the iconic American fast food chain posted declining same-store sales growth that missed forecasts by a long shot. U.S. sales fell by the most in more than a decade.

mcd-stock-burger-king-bkw-and-jack-are-eating-your-lunchIt’s a troubling continuation of a recent trend at McDonald’s, wherein an influx of competitors, the growing popularity of customizable dishes, a focus on healthier food and currency headwinds have combined to form a perfect storm for MCD stock.

McDonald’s stock is off about 4% in 2014, while the stock of rivals like Burger King Worldwide Inc (BKW) and Jack in the Box Inc. (JACK) are up 45% and 51%, respectively.

Investors Weren’t Lovin’ the Sales at MCD

Sales at U.S. stores open at least 13 months fell 4.6% in November, far steeper than the 1.9% decline analysts expected. Sales at all McDonald’s across the globe open at least 13 months were also off, slipping 2.2% last month and coming in below the 1.7% expected decline.

Burger King investors, on the other hand, are experiencing quite a different reality: last quarter North American same-store sales rose by 3.7% and global same-store sales jumped 2.7%. BKW stock is up about 8% since those numbers came out on Sept. 15.

BKW stock investors have something else to be excited about, too: Europe. Burger King formed a joint venture, Burger King SEE SA, through which it will aggressively expand into Italy, Poland, Greece and Romania, according to a recent Bloomberg report.

Burger King also recently acquired the doughnut-and-coffee chain Tim Horton’s Inc. (USA) (THI) for about $11 billion in an inversion tax move that was approved by the government of Canada last week. But before you go placing flimsy paper crowns on your head and annexing your neighbor’s land, BKW investors should learn from the woes MCD stockholders have experienced.

It’s great that Burger King is thinking globally, but overseas expansion can sometimes be more trouble than its worth. McDonald’s stock, for instance, is one of the five blue-chip stocks highly vulnerable to eurozone weakness that I wrote about in late October when the euro was hitting fresh lows against the U.S. dollar.

I noted then and emphasize now how devastating an over-reliance on foreign sales can be, cautioning that McDonald’s

“is far and away the blue-chip stock with the heaviest reliance on Europe, relying on the struggling continent for a remarkable 40% of annual sales. No small wonder, then, that MCD stock is in the red for 2014, a year in which the euro has lost major ground relative to the U.S. dollar.”

And it’s not just Europe that’s giving MCD headaches overseas. How about the entire Asia, Middle East and Africa region, where same-store sales dropped 4% in November? Consumers in those parts of the world are still reluctant to return after a China meat-supplier sourcing scandal in July.

As far as competing fast food investments, Jack in the Box stock has had an incredible year, but its growth isn’t supposed to be anything special, with analysts calling for 2.4% sales growth this fiscal year.

The real winner in the category is not MCD, BKW, or JACK. It’s Chipotle Mexican Grill, Inc. (CMG) stock, the same stock that’s been at the top of the heap for the last few years. With sales growth slated for 27.9% this year and the pricing power that comes with being on the right side of the organic trend, CMG stock blows MCD out of the water.

John Divine is assistant editor of InvestorPlace.com. As of this writing, he held no position in any of the aforementioned stocks. You can follow him on Twitter at @divinebizkid.

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