The Week Ahead: McDonald's and Walt Disney to Report Earnings

As another week in earnings season begins, we expect McDonald's MCD to start us off with a report on Monday. On Thursday, we expect to see reports from Walt Disney DIS and Cisco Systems CSCO. Wide-moat McDonald's has been combating the effects of the coronavirus pandemic with several strategies, such as the Travis Scott celebrity meal promotion, menu innovations like Spicy McNuggets, and enhancements to digital and drive-thru ordering. We believe these tactics have long-term potential for the fast-food restaurant. Restrictions from the coronavirus weigh heavily on the restaurant sector, and McDonald's efforts to offset pandemic-related losses are promising. On Oct. 7, Third Point's Daniel Loeb sent a letter to Disney CEO Bob Chapek about the opportunity that the entertainment company, which has a Morningstar Economic Moat Rating of wide, had to gain further share in the streaming marketplace by halting the dividend payout policy and reallocating the money toward financing the production of more original content for the streaming platforms. Loeb also suggested that Disney should debut more of its blockbuster films on Disney+ and offer more of its content for "a simple subscription fee" as movie theaters continue to struggle in the pandemic. However, we think Disney's main advantage against Netflix in the non-COVID world is its use of multiple windows to monetize content, like movie theaters. The pandemic spending environment and trends have not been in favor of narrow-moat Cisco. For the short term, we expect demand weakness to continue impacting the hardware and software supplier. As for the long term, we do have confidence in Cisco thanks to the company's product portfolio strategy, solid operating profile, and balance sheet.