Raphael Stevens

McDonald’s topped Wall Street’s estimates for its third-quarter earnings and revenue.
The fast-food chain saw same-store sales growth in its international markets accelerate as Covid-19 restrictions eased.
Shares of McDonald’s have risen 11% this year, giving it a market value of $184 billion.

McDonald’s on Wednesday reported quarterly earnings and revenue that topped analysts’ estimates as its international sales bounced back, despite Covid-19 resurgences in some markets.
In its home market, the nationwide launch of its loyalty program lifted digital sales, and larger order sizes and menu price increases led to higher average check.

On the heels of its strong performance, McDonald’s raised its forecast for systemwide sales growth for full-year 2021.
Shares of the company rose more than 2% in premarket trading.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

Earnings per share: $2.76 adjusted vs. $2.46 expected
Revenue: $6.2 billion vs. $6.04 billion expected

The company reported fiscal third-quarter net income of $2.15 billion, or $2.86 per share, up from $1.76 billion, or $2.35 per share, a year earlier.
Excluding strategic gains, McDonald’s earned $2.76 cents per share, beating the $2.46 per share expected by analysts surveyed by Refinitiv.

Net sales rose 14% to $6.2 billion, topping expectations of $6.04 billion. Worldwide, same-store sales climbed 12.7% from a year ago and 10.2% on a two-year basis.
In McDonald’s home market, same-store sales increased by 9.6% from a year earlier, when the fast-food giant started to see demand bounce back. On a two-year basis, same-store sales rose 14.6%. The chain credited its new chicken sandwich, a famous orders promotion with rapper Saweetie and other menu and marketing promotions for its strong performance.
Since the launch of its U.S. loyalty program in early July, the company has enrolled over 21 million members, with 15 million active users. For comparison, Chipotle Mexican Grill launched its loyalty program in 2019 and counted 24.5 million customers as members at the end of its latest quarter.
In October, the chain is seeing same-store sales growth in the low double-digits on a two-year basis. CFO Kevin Ozan said the company expects similar results for the rest of the fourth quarter.
McDonald’s recovery is outpacing that of many of its rivals, including Restaurant Brands International’s Burger King. On Monday, the burger chain reported its U.S. same-store sales shrank by 1.6% in the third quarter after the chain began transitioning away from paper coupons and value meals. Burger King’s global same-store sales climbed 7.9% after falling 7% a year earlier.
McDonald’s international operated markets segment saw its same-store sales rise 13.9% from a year ago, fueled by strong demand in the United Kingdom. The division also saw positive same-store sales in Canada, France and Germany as restrictions eased. However, Australia’s same-store sales were dampened by another round of lockdowns in some regions. On a two-year basis, the segment’s same-store sales climbed 8.9%.
The company’s international developmental licensed markets division reported 16.7% same-store sales growth. While China’s same-store sales shrank during the quarter due to spikes of Covid-19, Japan and Latin America reported strong sales. On a two-year basis, same-store sales rose 4.9%.
For the rest of fiscal 2021, McDonald’s is predicting systemwide sales growth in the high teens, excluding currency fluctuations. It previously forecast growth in the mid-to-high teens.
Read the full earnings release here.

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Major Tesla investor Ron Baron told CNBC on Wednesday that he’s made $6 billion on his investment into the electric automaker.
He plans to remain a shareholder for at least another ten years.
At more than $1,000 as of Wednesday, Baron’s namesake investment firm holds almost 6 million Tesla shares, on a cost of ownership basis at $42.88 each.

Major Tesla investor Ron Baron told CNBC on Wednesday that he’s made $6 billion on his investment into the electric automaker and plans to remain a shareholder for at least another ten years.
At more than $1,000 as of Wednesday, Baron’s namesake investment firm, Baron Capital, holds almost 6 million Tesla shares, on a cost of ownership basis at $42.88 each. Baron Capital has $58.9 billion in assets under management.

“We made our clients $54 billion in profits, and that $54 billion in profits is included about $6 billion from Tesla from a $380 million investment, you know 7 or 8 years ago,” Baron said on “Squawk Box.”
Back in March, Baron predicted Tesla’s stock would reach a price of $2,000 per share over the next ten years and would be $1,500 by 2024. Despite the predictions, Baron said the time that he sold 1.8 million Tesla share for his firm’s clients, a move he called “painful” but necessary for “risk mitigation.”
Baron, whose firm sold another 41,000 shares of Tesla in October, remains extremely bullish on the stock, calling Musk a hard working, inspiring and “brilliant guy.”
“When I first met Elon ten years ago I was skeptical about whether it would be successful, and it’s only after we started producing the Model S that we began to purchase stock,” Baron said.
The longtime Tesla investor is also excited about Elon Musk’s SpaceX venture, which earlier this month hit a $100 billion valuation. Baron suggested most people wouldn’t be as curious about space without the mega-billionaire, and that the U.S. government should be more appreciative of Musk’s contributions.

“There would not be electric cars were it not for Elon Musk, in fact you probably wouldn’t be into space the way you are right now were it not for Elon Musk,” Baron said. “The two most popular companies for engineers when they graduate to work for is …Tesla and SpaceX.”
Baron made these remarks around his criticism of the billionaires’ tax unveiled Wednesday by Democrats.
The main risk to the future of Tesla is Musk’s health, according to Baron. “The biggest risk I think we have is his health,” Baron said. “He sleeps five hours a day and he works 19 hours a day … so short term, that’s the risk.”
Despite the lack of sleep, Musk is currently in good health, Baron said. “Hopefully he stays healthy for a really long time, he’s got big plans.”
Tesla’s stock market value is currently more than $1 trillion, with shares up nearly 1.5% before the bell Wednesday.

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A General Motors Co. (GM) Chevrolet 2020 Silverado HD High Country edition pickup truck sits on the assembly line during a reveal event at the GM plant in Flint, Michigan, U.S., on Tuesday, Feb. 5, 2019.
Jeff Kowalsky | Bloomberg | Getty Images

DETROIT – General Motors on Wednesday topped Wall Street’s earnings and revenue estimates for the third quarter, while telling investors its full-year results would be at the “high end” of its previous guidance.
The third-quarter was expected to be a rougher one than the first half of the year for GM. Analysts, however, said they expect relatively solid results, despite a global shortage of semiconductor chips that has depleted vehicle inventories and shuttered plants.

Here’s how GM performed, compared with analysts estimates as compiled by Refinitiv:

Adjusted earnings: $1.52 a share vs. 96 cents a share estimate
Revenue: $26.78 billion vs. $26.51 billion estimate

GM’s previously told investors it would earn between $11.5 billion and $13.5 billion on an adjusted basis, or $5.70 to $6.70 a share and between $8.1 billion and $9.6 billion on an unadjusted basis.
“Our third-quarter 2021 results clearly illustrate the strength of the underlying business that is funding our future, especially when you put them in the context of the calendar year,” GM CEO and Chair Mary Barra said Wednesday in a letter to shareholders.

Strong vehicle pricing as well as income of about $1.1 billion from its financial arm also boosted GM’s results. GM Financial’s earnings through the first three quarters were $3.9 billion, up 132% from a year earlier.
The automaker expects strong vehicle pricing to continue “well into” next year, Barra said Wednesday during CNBC’s “Squawk Box.”

Shares of GM jumped by more than 3% before retreating to a drop of about 2% before the markets opened. Shares of GM are up by 38% in 2021.
On an unadjusted basis, net income was $2.4 billion for the third quarter compared with $4 billion a year earlier, when dealerships and plants largely reopened after being shuttered during some of the second-quarter due to the coronavirus pandemic. The automaker reported pretax adjusted earnings of $2.9 billion for the third quarter, down from $5.3 billion a year earlier.

Third-quarter earnings also benefited from a deal with LG Electronics that would offset $1.9 billion of $2.0 billion in estimated costs of a recall of Chevrolet Bolt EVs due to fire risks. LG produced defective batteries for the vehicles at plants in South Korea and Michigan.
Barra during a call Wednesday said the automaker’s supply of semiconductor chips is improving, but “It still continues to be somewhat volatile.” She said GM expects the shortage to continue into the first half of next year.
“We are seeing some improvement in fourth quarter; we expect to see some additional improvement in Q1,” she told reporters during a call Wednesday morning. “Although we think the first half of next year, we’ll still see impact from the semiconductor shortage. We think it will get better toward the end of the year.”
GM previously warned investors that its North American wholesale volumes would be down by about 200,000 units in the second half of 2021 compared with the first half, due to the parts problem.
GM said third-quarter chip supplies were largely due to the spread of the Covid-19 delta variant in southeast Asia, specifically Malaysia, according to Barra. Earlier this month, GM said the semiconductor chip situation was improving.
Nov. 1 is expected to mark the first time since February that none of GM’s North American assembly plants will be idled due to the chip shortage. However, two remain down for retooling and some are operating on less shifts.

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Coca-Cola’s third-quarter earnings and sales topped analysts’ estimates, prompting the beverage giant to hike its annual outlook again.
Coke is seeing a recovery in its away-from-home channels, like restaurants and movie theaters, which had cratered this time last year.
The company reported strength in markets where coronavirus-related uncertainty has been abating.

Coca-Cola on Wednesday reported fiscal third-quarter earnings and sales that topped analysts’ estimates, prompting the beverage giant to hike its annual outlook again.
Chairman and CEO James Quincey said in prepared remarks that Coke is emerging from the coronavirus pandemic as a stronger business. It’s seeing a recovery in its away-from-home channels, like restaurants and movie theaters, which had cratered this time last year.

Coke shares rose around 3% in premarket trading on the news.
Here’s how the company did compared with what Wall Street analysts surveyed by Refinitiv were expecting:

Earnings per share: 65 cents adjusted vs. 58 cents expected
Revenue: $10.04 billion vs. $9.75 billion expected

Coke’s net income for the three-month period ended Oct. 1 grew to $2.5 billion, or 57 cents per share, compared with $1.7 billion, or 40 cents a share, a year earlier. Excluding one-time items, the company earned 65 cents per share, topping estimates for 58 cents.
Net sales rose 16% to $10.04 billion from $8.65 billion a year earlier. That beat expectations for $9.75 billion. Organic revenue, which excludes the impact of acquisitions, divestitures and foreign currency, climbed 14%. Unit case volume, which strips out the impact of currency and price changes, was up 6% and came in ahead of 2019 levels.
Coke’s sparkling soft drinks unit, which includes its namesake soda, saw volume increase by 6% in the quarter. The nutrition, juice, dairy and plant-based beverage business reported volume growth of 12%, in part thanks to strong sales of Minute Maid. The hydration, sports, coffee and tea segment saw volume growth of 6%. Coffee grew 19%, driven by the ongoing reopening of Costa cafes in the United Kingdom.

Coke said it saw strength in markets where coronavirus-related uncertainty has been abating.
Volume growth was up 8% in its Europe, Middle East and Africa region, led by markets including Russia, Nigeria and Turkey. Unit case volume in Latin America also rose 8%. Volume growth climbed 4% in North America and was up 3% in Asia-Pacific.
Part of what is driving Coke’s comeback is a significant increase in its marketing and advertising spending. The company said it nearly doubled its marketing budget from a year earlier, when Coke slashed costs to shore up cash. Coke also debuted an ad campaign titled “Real Magic” for its trademark soda brand, its first in five years.
The beverage giant has also hiked prices to counter some of the impact from rising commodity and freight costs.
It now sees full-year organic revenue growth of 13% to 14%, an increase from its previous range of up 12% to 14%. It expects adjusted earnings per share to increase 15% to 17%, higher than its previous range of up 13% to 15%.
Coke’s stock has dropped nearly 1% year to date. The company has a market value of $235 billion.
Find the full earnings press release from Coke here.
—CNBC’s Amelia Lucas contributed to this report.

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An opportunity zone is an investment program created by the Tax Cuts and Jobs Act of 2017 giving certain investments in lower income areas tax advantages.
Opportunity zones funds generated buzz when introduced four years ago, but they’ve always been more about hype than substance when it comes to tax planning.
Even if the tax code is changed to promote the zones, they’re best kept at arm’s length.

Reza Estakhrian | The Image Bank | Getty Images

Opportunity zone fund investments are back. Granted, they never went away, but after generating a great deal of attention a few years ago, much of the excitement surrounding them died down.
However, investors are starting to pay attention again, with lawmakers in Washington, D.C., mulling proposals that could have significant implications for wealthy individuals and families.

An opportunity zone is an investment program created by the Tax Cuts and Jobs Act of 2017 giving tax advantages to certain investments in lower income areas . Qualified opportunity zone funds allow individuals to roll gains from any capital asset into under-invested communities and defer the income taxes until Dec. 31, 2026.
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Moreover, anyone who stays in such a fund for at least 10 years receives a stepped-up basis on that investment’s return.
On the surface, these benefits seem tempting. However, as financial advisors ponder deferral strategies for their high-net-worth clients who may be impacted by potential tax hikes, they need to understand some of the red flags associated with investments in opportunity zones.
Let’s consider the following:

1. The train has left the station. If the beneficiaries from pandemic-induced migration trends (think downtown Austin, Texas) are tier-one real estate markets, most opportunity zones are in pockets of the U.S. that are considerably less attractive from an investment perspective.
Therefore, even as some of these areas may have experienced an opportunity zone-fueled boom, that real estate is likely fully valued at this point. That leaves limited future upside, which is a problem given that investors must tie up their money for years to take advantage of the tax breaks.

2. The costs. Even low-cost, passively managed funds come with fees, whether to pay managers/advisors or tackle legal, marketing or accounting expenses.
And opportunity zone funds tend to have a lot of them, including product distribution, management, development and loan fees, as well as syndication costs. As with other types of investments, these fees will eat into returns, a point made worse by the fact that there are few proven fund managers/companies in this space.
3. The risks. Though every investment entails some level of risk, the timelines associated with opportunity zone funds create an extra layer. Once the tax deferral period ends in December 2026, many will likely cash out soon after, which could cause the value of funds to decline. That, in turn, will render the stepped-up basis in the 10th year somewhat of a moot point since many of the projects associated with these funds could experience negligible gains — or even lose money — over that period.

4. The time crunch. New opportunity zone funds are hard to establish even in the best conditions because it’s challenging for sponsors to deploy capital within 180 days, which is the time allotted to investors to roll over their gains and realize the tax benefits associated with them.
Anecdotally, we’ve reached out to several accountants on behalf of clients. They’ve all indicated that the overwhelming majority of these projects never get off the ground due to property identification concerns.
Of course, there are other tax options for high-net-worth investors.
It often makes sense for wealthy individuals to defer gains on real estate, company stock or other assets. That said, opportunity zone funds are not the answer.

Better options include so-called 1031 exchanges (real estate), 1045 exchanges (qualified small business stock), installment sales or a range of charitable giving strategies. As a rule, it’s never a good idea to allow the tax tail to wag the investment dog.
Though opportunity zones generated a buzz when first introduced four years ago, the fact is they’ve always been more about hype than substance when it comes to tax planning.
Therefore, even as the tax code could undergo some significant changes in the coming weeks, it’s best to keep them at arm’s length. 

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