Consumer Discretionary/Staples
Mike Becher
 Julie Berens
 Beth Blue
 Sanaata Brown
 Brian Creek
 Mick Kozlowski

Industry/Sector Overview

Due to cyclicality of the economy we
suggest:
– Overweight Consumer Discretionary
– Underweight Consumer Staples
Recommendation
Buy: Wal-Mart 0%  1.73%
 Buy: Harley Davidson 0%  1.21%
 Trim: Altria 1.56%  .95%
 Trim: McDonald’s 6.58%  3.25%

– Overall, Consumer stocks decrease by 1% of
portfolio value.
Wal-Mart
Business Analysis

Catalysts:
•
Wal-Mart’s Business Plan


•
Purchasing Power
•
•
Move into rural areas
Supply Chain Management
Economies of scale
Size

Market capitalization
Wal-Mart
Financial
Analysis
Cash Flow Analysis
WAL-MART STORES INCORPORATED (WMT)
FYE Jan
Net Income Reported ($ Mil)
Accounting Adjustment
Net Income Adjusted
StockVal ®
2003
% Chg
2002
% Chg
2001
% Chg
2000
% Chg
1999
% Chg
8039.0
21
6671.0
6
6295.0
17
5377.0
21
4430.0
26
235.0
0
235.0
-29
332.0
0.0
0.0
8039.0
16
6906.0
6
6530.0
14
5709.0
29
4430.0
24
3432.0
4
3290.0
15
2868.0
21
2375.0
27
1872.0
15
11471.0
13
10196.0
8
9398.0
16
8084.0
28
6302.0
21
Capital Expenditures
9355.0
12
8383.0
4
8042.0
30
6183.0
66
3734.0
42
Free Cash Flow Adjusted
2116.0
17
1813.0
34
1356.0
-29
1901.0
-26
2568.0
0
Dividends Common ($ Mil)
1333.8
6
1254.7
17
1076.2
20
894.8
25
717.6
13
Free Cash Flow After Dividends
782.2
40
558.3
100
279.8
-72
1006.2
-46
1850.4
-4
Net Cash From Operations
12532.0
22
10260.0
7
9604.0
17
8194.0
8
7580.0
6
Net Cash From Investing
-9709.0
-36
-7146.0
18
-8714.0
48
-16846.0
-281
-4418.0
0
Net Cash From Financing
-2222.0
25
-2978.0
-574
-442.0
8553.0
-2756.0
-29
-4.0
86
-29.0
88
-250.0
76.0
597.0
458
107.0
-46
198.0
-23.0
Depreciation & Amort
Cash Flow Adjusted
Other Cash Flow s
Change In Cash & Equiv
• Net Income is increasing
• Free cash flows are increasing by a greater percent than net income
192
26.0
432.0
-23
Wal-Mart
Financial Analysis
DuPont Analytics
WAL-MART STORES INCORPORATED (WMT)
Price 56.190 07/25/03 FYE Jan
INT
MARGIN%
BURDEN
EBIT
EBT
-------
-------
Sales
EBIT
TAX
BURDEN%
T
StockV
ASSET
TURN
LEVERAGE
Sales
Assets
1 - ----
-------
-------
ROE
Acct
ROE
EBT
Assets
Equity
Rpt%
Adj%
Adj%
2003
5.69
0.91
64.72
2.74
2.39
21.60
0.00
21.60
2002
5.62
0.88
63.75
2.69
2.43
20.08
0.71
20.79
2001
6.06
0.87
63.50
2.58
2.60
22.02
0.82
22.84
2000
6.16
0.89
63.25
2.74
2.56
22.91
1.41
24.32
1999
5.93
0.90
62.58
2.89
2.41
22.37
0.00
22.37
1998
5.54
0.88
63.02
2.78
2.38
19.78
0.19
19.97
1997
5.47
0.85
63.01
2.72
2.42
19.16
0.00
19.16
1996
5.64
0.82
63.05
2.66
2.56
19.94
0.00
19.94
1995
6.11
0.85
62.90
2.78
2.52
22.84
0.00
22.84
1994
6.35
0.86
63.21
2.87
2.41
23.92
0.00
23.92
6.43
0.89
•1992
ROE is stable
6.53
0.89
•1991
Margins are
also
stable
6.88
0.91
63.00
3.08
2.29
25.33
0.00
25.33
63.00
3.27
2.17
26.04
0.00
26.04
63.20
3.33
2.10
27.67
0.00
27.67
1990
63.01
3.55
2.09
30.86
0.00
30.86
1993
7.15
0.93
Wal-Mart
Financial Analysis
First Call FY1 & FY2 Revision Trend
StockVal®
WAL-MART STORES INCORPORATED (WMT)
FY1 JAN 2004
CURRENT EST 2.03 DOWN 1.46% FROM JUL 2002
1%
2.07
0%
2.07
2.06
2.06
2.05
2.05
-1%
2.04
2.04
2.04
2.03
2.03
2.03
2.03
4/03
5/03
6/03
LAST
2.32
2.32
2.31
2.31
6/03
LAST
-2%
7/02
8/02
9/02
10/02
11/02
12/02
1/03
2/03
3/03
FY2 JAN 2005
CURRENT EST 2.31 UP 2.21% FROM OCT 2002
3%
2%
2.31
2.31
2/03
3/03
2.30
1%
0%
7/02
8/02
9/02
2.26
10/02
11/02
2.27
2.27
12/02
1/03
• Earnings estimate revisions are stable
4/03
5/03
Wal-Mart
StockVal ®
Growth & Margin Check
WAL-MART STORES INCORPORATED (WMT)
Price 56.190 07/25/03
Percent Change
Quarter
Revenue
REV
RPS
EARN
EPS
Default Growth Rate Estimate 12.0%
Analyst Growth Rate Estimate 12.0%
Actual
Year
Profit
EPS
Ago
Margin %
Momentum %
SF
REV
EPS
Jul 01
52,799.0
15
15
0
0
0.37
0.37
3.1
0
+14
0
Oct 01
52,738.0
15
16
6
6
0.34
0.32
2.9
0
+14
+5
Jan 02
64,210.0
14
14
8
9
0.50
0.46
3.5
0
+15
+11
Apr 02
54,960.0
14
15
15
16
0.37
0.32
3.0
0
+13
+13
Jul 02
59,694.0
13
14
23
24
0.46
0.37
3.4
0
+12
+23
Oct 02
58,797.0
11
13
19
21
0.41
0.34
3.1
0
+10
+17
Jan 03
71,073.0
11
12
13
14
0.57
0.50
3.5
0
+12
+16
Apr 03
57,224.0
4
6
9
11
0.41
0.37
3.1
0
+4
+9
T4Q
246,788.0
10
11
16
17
1.85
9
0.50
High Estimate
11
0.51
Median Estimate
Low Estimate
7
0.49
Number of Estimates
Jul 03
Mean Estimate Next Quarter
Number of Estimates
25
REV
RPS
EARN
Long-Term Growth Rate Estimates
14.0%
21
Standard Deviation
Point-to-Point Growth Rates (%)
Years
3.3
2
Least Squares Growth Rates (%)
EPS
Years
REV
RPS
EARN
EPS
1
10
11
16
17
1
9
11
13
15
3
13
13
11
11
3
13
13
10
11
5
15
15
17
18
5
16
16
15
15
7
14
15
17
17
7
16
16
18
19
10
16
16
15
15
10
15
16
16
16
15
20
20
18
18
15
19
19
17
17
20
24
23
22
22
20
23
23
21
21
Wal-Mart
Valuation Analysis
StockVal®
WAL-MART STORES INCORPORATED (WMT) Price 56.2
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2.2
2.0
1.8
HI
LO
ME
CU
1.6
1.4
2.05
0.66
1.28
1.46
1.2
1.0
0.8
0.6
PRICE / YEAR-FORWARD EARNINGS RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30)
2.2
07-23-1993
07-25-2003
1.8
1.5
HI
LO
ME
CU
1.2
1.0
1.93
0.47
1.00
1.61
0.8
0.6
0.5
07-23-1993
07-25-2003
0.4
PRICE RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
• Both are trending upward
Wal-Mart
Recommendation

Buy: Wal-Mart 0%  1.73%

Risks:
– Future growth is already priced into stock
– International growth may not be successful
– May over-diversify their product offerings
Harley Davidson
Business Analysis
Catalysts:
•
•
•
Returns Have Been Increasing and are
Projected to Continue
High Long-Term Growth Rate Estimates
Mid-life Crisis & Early Retirees (excess cash)
Harley Davidson
Financial Analysis
Cash Flow Analysis
HARLEY-DAVIDSON INCORPORATED (HDI)
FYE Dec
Net Incom e Reported ($ Mil)
Accounting Adjustm ent
Net Incom e Adjusted
StockVal ®
2002
% Chg
2001
% Chg
2000
% Chg
1999
% Chg
1998
% Chg
580.2
33
437.7
26
347.7
30
267.2
25
213.5
23
0.0
0.0
-6.9
0.0
0.0
580.2
33
437.7
28
340.8
28
267.2
25
213.5
23
175.8
15
153.1
15
133.3
17
113.8
30
87.4
25
756.0
28
590.8
25
474.2
24
381.0
27
300.9
23
Capital Expenditures
323.9
12
290.4
43
203.6
23
165.8
-9
182.8
-2
Free Cash Flow Adjusted
432.1
44
300.4
11
270.6
26
215.2
82
118.2
103
Dividends Com m on ($ Mil)
41.2
17
35.2
17
30.1
11
27.3
13
24.1
15
Free Cash Flow After Dividends
390.9
47
265.2
10
240.4
28
188.0
100
94.0
153
Net Cash From Operations
779.5
3
756.8
34
565.3
31
431.6
31
330.7
7
Net Cash From Investing
-1018.0
-32
-771.5
-351
-170.9
43
-299.6
12
-340.2
16
Net Cash From Financing
79.9
132
34.4
-158.1
-39
-113.8
27.1
-73
0.0
0.0
0.0
-158.5
19.7
Depreciation & Am ort
Cash Flow Adjusted
Other Cash Flow s
Change In Cash & Equiv
• Income Increasing by 33%!!!
• Free Cash Flow Increasing by 47%!!!!
• Increased Capital Expenditures
-92
236.3
1195
0.0
40
0.0
-55
18.2
3
17.7
255
Harley Davidson
Financial Analysis
DuPont Analytics
HARLEY-DAVIDSON INCORPORATED (HDI)
Price 45.700 07/25/03 FYE Dec
INT
MARGIN%
BURDEN
EBIT
EBT
-------
-------
Sales
EBIT
StockV
TAX
BURDEN%
T
ASSET
TURN
LEVERAGE
Sales
Assets
1 - ----
-------
-------
ROE
Acct
ROE
EBT
Assets
Equity
Rpt%
Adj%
Adj%
2002
21.65
1.00
65.50
1.17
1.75
29.09
0.00
29.09
2001
19.77
1.00
65.00
1.23
1.76
27.69
0.00
27.69
2000
18.64
1.00
63.39
1.29
1.77
27.09
-0.53
26.56
1999
16.95
1.00
63.50
1.23
1.84
24.39
0.00
24.39
1998
16.11
1.00
63.50
1.19
1.90
23.00
0.00
23.00
1997
15.68
1.00
63.00
1.21
1.96
23.37
0.00
23.37
1996
14.87
1.00
63.00
1.32
2.01
28.69
-3.91
24.78
1995
13.13
0.99
63.10
1.61
1.81
24.25
-0.31
23.94
1994
13.56
1.00
61.51
1.92
1.59
27.51
-2.13
25.38
1993
13.66
1.00
60.05
1.86
1.52
-3.60
26.72
23.12
• Margins have been increasing since 1995
11.79
0.94
62.13
1.83
•
ROE
continues
to
rise
1991
12.19
0.90
62.44
1.69
1.57
18.76
1.00
19.76
1.90
16.93
5.18
22.11
1990
8.57
0.85
61.18
2.20
2.22
21.31
2.69
24.00
1989
8.97
0.75
61.52
2.03
2.81
23.71
-0.24
23.47
1988
9.68
0.67
59.02
1.81
4.24
25.91
7.05
32.96
1992
Harley Davidson
Financial Analysis
First Call FY1 & FY2 Revision Trend
StockVal®
HARLEY-DAVIDSON INCORPORATED (HDI)
FY1 DEC 2003
CURRENT EST 2.41 UP 18.72% FROM JUL 2002
20%
2.41
15%
2.32
2.32
5/03
6/03
2.26
10%
2.22
2.22
2.22
2.22
11/02
12/02
1/03
2/03
3/03
2.13
5%
0%
2.21
2.03
7/02
2.07
2.08
8/02
9/02
10/02
4/03
FY2 DEC 2004
CURRENT EST 2.67 UP 0.00% FROM DEC 2002
2.67
0%
LAST
2.67
-1%
2.63
2.63
5/03
6/03
2.62
-2%
2.61
2.60
-3%
2.59
7/02
8/02
9/02
10/02
11/02
12/02
1/03
2/03
3/03
• Earnings estimates revised to increase 18.72% for 2003
4/03
LAST
Harley Davidson
StockVal ®
Growth & Margin Check
HARLEY-DAVIDSON INCORPORATED (HDI)
Price 45.700 07/25/03
Percent Change
Quarter
Revenue
REV
RPS
EARN
EPS
Default Growth Rate Estimate 16.0%
Analyst Growth Rate Estimate 16.0%
Actual
Year
Profit
EPS
Ago
Margin %
Momentum %
SF
REV
EPS
Sep 01
861.6
19
19
33
33
0.36
0.27
12.8
+1
+18
+29
Dec 01
905.9
18
19
25
26
0.39
0.31
13.2
+1
+17
+24
Mar 02
927.8
19
20
30
30
0.39
0.30
12.8
+1
+18
+25
Jun 02
1,001.1
16
17
23
24
0.47
0.38
14.3
+1
+16
+24
Sep 02
1,135.5
32
33
49
50
0.54
0.36
14.5
+1
+30
+45
Dec 02
1,026.5
13
13
25
26
0.49
0.39
14.6
+1
+12
+22
Mar 03
1,113.7
20
20
56
56
0.61
0.39
16.7
+2
+18
+47
Jun 03
1,218.9
22
22
40
40
0.66
0.47
16.5
+1
+20
+36
T4Q
4,494.6
22
22
42
43
2.30
Sep 03
Mean Estimate Next Quarter
4
0.56
Long-Term Growth Rate Estimates
High Estimate
19
0.64
Median Estimate
Low Estimate
-4
0.52
Number of Estimates
Number of Estimates
14
REV
RPS
EARN
18.0%
13
Standard Deviation
Point-to-Point Growth Rates (%)
Years
15.6
2
Least Squares Growth Rates (%)
EPS
Years
REV
RPS
EARN
EPS
1
22
22
42
43
1
18
18
41
41
3
18
18
32
33
3
18
19
32
33
5
19
19
31
31
5
18
19
29
30
7
17
17
28
27
7
18
18
26
26
10
17
17
26
26
10
17
17
25
25
15
14
11
25
23
15
14
13
23
22
20
20
Harley Davidson
Valuation Analysis
StockVal®
HARLEY-DAVIDSON INCORPORATED (HDI) Price 45.7
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
1.7
1.6
1.5
HI
LO
ME
CU
1.4
1.3
1.2
1.63
0.83
1.15
1.00
1.1
1.0
0.9
0.8
PRICE / YEAR-FORWARD EARNINGS RELATIVE TO S&P CONSUMER DIS. SECTOR COMPOSITE A (SP-25)
7.3
07-23-1993
07-25-2003
5.8
4.6
HI
LO
ME
CU
3.6
2.8
2.2
6.20
0.94
1.75
4.53
1.7
1.3
1.0
07-23-1993
07-25-2003
0.8
PRICE RELATIVE TO S&P CONSUMER DIS. SECTOR COMPOSITE A (SP-25) M-Wtd
• Both graphs are trending upward and are off their highs
Harley Davidson
Recommendation

Buy: Harley Davidson 0%  1.21%

Risks:
– If economy does not recover, sales volume
may decline
– Money could be spent on a new trend
Altria
Business Analysis

Catalysts:
•
•
•
Pending Future Litigation
Decrease in Earnings Projections
Decrease in Domestic Sales


Pressure from Generics
Fewer New Addicts
Altria
Financial Analysis
Cash Flow Analysis
ALTRIA GROUP INCORPORATED (MO)
FYE Dec
StockVal ®
2002
% Chg
2001
% Chg
2000
% Chg
1999
% Chg
1998
% Chg
Net Incom e Reported ($ Mil)
11102.0
30
8560.0
1
8510.0
11
7675.0
43
5372.0
-15
Accounting Adjustm ent
-1371.3
1328.5
208
431.0
31
327.9
-87
2485.8
216
Net Incom e Adjusted
9730.7
-2
9888.5
11
8941.0
12
8002.9
2
7857.8
11
1331.0
-43
2337.0
36
1717.0
1
1702.0
1
1690.0
-1
11061.7
-10
12225.5
15
10658.0
10
9704.9
2
9547.8
9
Capital Expenditures
2009.0
5
1922.0
14
1682.0
-4
1749.0
-3
1804.0
-4
Free Cash Flow Adjusted
9052.7
-12
10303.5
15
8976.0
13
7955.9
3
7743.8
12
Dividends Com m on ($ Mil)
5194.8
6
4906.2
7
4589.4
4
4421.5
8
4109.3
5
Free Cash Flow After Dividends
3857.9
-29
5397.3
23
4386.6
24
3534.4
-3
3634.5
21
Net Cash From Operations
10612.0
19
8893.0
-19
11044.0
-3
11375.0
40
8120.0
-3
Net Cash From Investing
-2471.0
15
-2916.0
83
-17506.0
-553
-2682.0
-5
-2554.0
-313
Net Cash From Financing
-8165.0
-27
-6440.0
-7497.0
-93
-3894.0
29
Depreciation & Am ort
Cash Flow Adjusted
2658.0
Other Cash Flow s
136.0
-21.0
94
-359.0
Change In Cash & Equiv
112.0
-484.0
88
-4163.0
• Strong Cash Flows from Operations
• Losses Due to Litigation  Future Implications
-103
-177.0
1019.0
127.0
-43
1799.0
-12
Altria
Financial Analysis
DuPont Analytics
ALTRIA GROUP INCORPORATED (M O)
Price 40.280 07/18/03 FYE De c
INT
MARGIN%
BURDEN
EBIT
EBT
-------
-------
Sales
EBIT
StockV
TAX
BURDEN%
T
ASSET
TURN
LEVERAGE
Sales
Assets
1 - ----
-------
-------
ROE
Acct
ROE
EBT
Assets
Equity
Rpt%
Adj%
Adj%
2002
24.16
0.93
64.50
0.93
4.41
56.79
-7.01
49.78
2001
19.71
0.90
62.15
0.99
4.74
49.44
7.68
57.12
2000
20.63
0.93
61.31
1.05
4.63
56.15
2.85
59.00
1999
19.27
0.92
60.85
1.20
3.85
48.73
2.08
50.81
1998
15.04
0.88
59.69
1.20
3.72
34.53
15.97
50.50
1997
16.58
0.90
59.80
1.30
3.80
43.31
5.40
48.71
1996
17.26
0.89
59.00
1.27
3.85
44.70
0.00
44.70
1995
16.18
0.87
58.61
1.24
3.98
40.72
0.20
40.92
1994
14.71
0.86
57.51
1.25
4.25
38.71
0.00
38.71
1993
12.74
0.80
57.59
1.20
4.18
25.56
7.72
33.28
1992
17.28
0.84
57.38
1.21
3.88
39.39
0.00
39.39
15.50 Due to 0.80
56.33
3.84
24.58
9.78
• Strong ROE
Leveraged
Position 1.20
15.93
0.77
56.09
1.20
3.95
32.90
0.00
•Over
70%
of
Non-Current
assets
(including
good
will)
are
funded
by
LTD
1989
15.74
0.73
58.24
1.17
4.38
34.16
-1.77
1988
0.82
55.38
1.07
4.03
32.23
-0.84
•Over 14.58
112% of Productive
assets
(not including
good
will) funded
by LTD
• Accounting
Adjustment
Due to55.08
Litigation 
One Time
Expense?
1987
14.93
0.81
1.35
3.28
29.52
0.36
1991
34.36
1990
32.90
1986
14.23
0.76
53.45
1.34
3.68
28.44
0.00
32.39
31.39
29.88
28.44
Altria
Financial Analysis
First Call FY1 & FY2 Revision Trend
StockVal®
ALTRIA GROUP INCORPORATED (MO)
0%
FY1 DEC 2003
CURRENT EST 4.63 DOWN 15.36% FROM JUL 2002
5.47
5.40
5.39
-4%
-8%
4.99
4.86
-12%
4.77
4.73
-16%
7/02
0%
8/02
9/02
10/02
11/02
12/02
1/03
4.63
4.62
4.62
4.61
4.62
4.63
2/03
3/03
4/03
5/03
6/03
LAST
4.97
4.96
4.95
5/03
6/03
LAST
FY2 DEC 2004
CURRENT EST 4.95 DOWN 20.93% FROM JUL 2002
6.26
6.24
6.23
-6%
5.92
-12%
5.46
5.25
-18%
5.22
5.02
5.02
2/03
3/03
5.10
-24%
7/02
8/02
9/02
10/02
11/02
12/02
1/03
• Earnings revisions have decreased each quarter
4/03
Altria
StockVal ®
Growth & Margin Check
ALTRIA GROUP INCORPORATED (MO)
Price 40.990 07/25/03
Default Growth Rate Estimate 8.0%
Analyst Growth Rate Estimate 8.0%
Percent Change
Quarter
Revenue
REV
RPS
EARN
EPS
Actual
Year
Profit
Momentum %
EPS
Ago
Margin %
SF
REV
EPS
Sep 01
20,249.0
10
13
10
12
1.19
1.06
12.9
+1
+10
+12
Dec 01
19,882.0
12
15
12
15
1.08
0.94
11.9
+1
+11
+13
Mar 02
20,535.0
3
6
4
7
1.14
1.07
12.1
0
+3
+6
Jun 02
21,103.0
2
4
6
9
1.24
1.14
12.7
0
+2
+9
Sep 02
19,996.0
-1
3
2
6
1.26
1.19
13.4
0
-1
+6
Dec 02
18,774.0
-6
0
-18
-14
0.93
1.08
10.2
0
-5
-13
Mar 03
19,371.0
-6
0
-12
-6
1.07
1.14
11.3
0
-6
-6
Jun 03
20,831.0
-1
5
-5
2
1.26
1.24
12.3
+1
-1
+2
T4Q
78,972.0
-3
2
-8
-3
4.52
-2
1.23
High Estimate
0
1.26
Median Estimate
Low Estimate
-6
1.19
Number of Estimates
9
Number of Estimates
10
Standard Deviation
1
Sep 03
Mean Estimate Next Quarter
Point-to-Point Growth Rates (%)
Years
REV
RPS
EARN
11.8
Long-Term Growth Rate Estimates
9.0%
Least Squares Growth Rates (%)
EPS
Years
REV
RPS
EARN
EPS
1
-3
2
-8
-3
1
-4
2
-11
-6
3
2
7
4
8
3
3
7
3
7
5
2
6
5
8
5
4
8
6
10
7
2
5
7
10
7
3
5
7
10
10
3
5
7
10
10
3
5
10
13
15
7
9
10
13
15
5
7
10
12
20
10
12
13
15
20
10
11
13
15
Altria
Valuation Analysis
StockVal®
ALTRIA GROUP INCORPORATED (MO) Price 40.3
1993
0.72
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
0.66
0.60
HI
LO
ME
CU
0.54
0.48
0.42
0.67
0.23
0.54
0.46
0.36
0.30
0.24
0.18
PRICE / YEAR-FORWARD EARNINGS RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30)
1.6
07-16-1993
07-18-2003
1.4
1.2
HI
LO
ME
CU
1.0
0.8
1.43
0.48
1.11
0.93
0.7
0.6
0.5
07-16-1993
07-18-2003
0.4
PRICE RELATIVE TO S&P CONS. STAPLES SECTOR COMPOSITE A (SP-30) M-Wtd
• Historically Inexpensive Relative to Consumer Staples due to unpredictability
of litigation
Altria
Recommendation

Trim: Altria 1.56%  .95% (market
weight)
– See what happens next quarter

Risks:
– Favorable Lawsuit Rulings
– Foreign Expansion Opportunities
McDonald’s
Business Analysis
Catalysts:
1. Current growth expected to continue due
to new menu items and extended hours
2. Dividend increase and stock repurchase
planned for fall 2003
3. Stock is currently undervalued
McDonald’s
Financial Analysis
Cash Flow Analysis
Sto
MCDONALDS CORPORATION (MCD)
FYE Dec
2002
% Chg
2001
% Chg
2000
% Chg
1999
% Chg
1998
Net Income Reported ($ Mil)
893.5
-45
1636.6
-17
1977.3
2
1947.9
26
1550.1
Accounting Adjustment
798.5
460
142.5
12.3
-94
219.0
1692.0
-5
1779.1
-10
1977.3
1
1960.2
11
1769.1
1050.8
-3
1086.3
7
1010.7
6
956.3
9
881.1
2742.8
-4
2865.4
-4
2988.0
2
2916.5
10
2650.2
2003.8
5
1906.2
-2
1945.1
4
1867.8
-1
1879.3
739.0
-23
959.2
-8
1042.9
-1
1048.7
36
770.9
Dividends Common ($ Mil)
307.6
2
301.1
1
298.4
6
280.8
11
253.0
Free Cash Flow After Dividends
431.4
-34
658.1
-12
744.5
-3
767.9
48
517.9
2890.1
8
2688.3
-2
2751.5
-9
3008.9
9
2766.3
-2466.6
-19
-2068.2
7
-2212.6
2
-2261.8
-16
-1948.2
-511.2
18
-623.7
-16
-536.7
14
-626.8
27
-860.3
0.0
0.0
-20
0.0
0.0
-3.6
2.2
-98
120.3
-42.2
Net Income Adjusted
Depreciation & Amort
Cash Flow Adjusted
Capital Expenditures
Free Cash Flow Adjusted
Net Cash From Operations
Net Cash From Investing
Net Cash From Financing
Other Cash Flows
Change In Cash & Equiv
0.0
-87.7
-2336
0.0
• Decrease in 2002 net income and free cash flows not indicative of current and future
performance
McDonald’s
StockVal ®
Growth & Margin Check
MCDONALDS CORPORATION (MCD)
Price 21.440 07/25/03
Default Growth Rate Estimate 6.7%
Analyst Growth Rate Estimate 6.7%
Percent Change
Quarter
Revenue
REV
RPS
EARN
EPS
Actual
Year
Profit
Momentum %
EPS
Ago
Margin %
SF
REV
EPS
Jun 01
3,707.5
4
8
-11
-8
0.36
0.39
12.7
+1
+4
-8
Sep 01
3,879.3
3
7
-10
-7
0.38
0.41
12.8
-1
+4
-9
Dec 01
3,771.5
5
8
-3
0
0.34
0.34
11.7
0
+5
0
Mar 02
3,597.4
2
5
1
3
0.30
0.29
10.8
0
+2
+3
Jun 02
3,862.1
4
6
7
8
0.39
0.36
13.0
0
+4
+9
Sep 02
4,047.0
4
6
-1
0
0.38
0.38
12.1
0
+4
0
Dec 02
3,899.2
3
6
-28
-26
0.25
0.34
8.1
0
+3
-26
Mar 03
3,799.7
6
7
-5
-3
0.29
0.30
9.7
0
+5
-3
T4Q
15,608.0
4
6
-7
-5
1.31
Mean Estimate Next Quarter
-5
0.37
High Estimate
-3
0.38
Median Estimate
Low Estimate
-5
0.37
Number of Estimates
Number of Estimates
15
Jun 03
REV
RPS
EARN
Long-Term Growth Rate Estimates
8.7%
12
Standard Deviation
Point-to-Point Growth Rates (%)
Years
10.8
2
Least Squares Growth Rates (%)
EPS
Years
REV
RPS
EARN
EPS
1
4
6
-7
-5
1
4
6
-12
-11
3
5
8
-6
-3
3
4
7
-6
-4
5
6
8
0
2
5
6
8
-1
2
7
6
8
2
4
7
7
8
3
4
10
8
9
6
7
10
8
9
7
8
15
8
9
7
9
15
8
9
9
10
20
9
10
9
10
20
9
10
10
11
McDonald’s
Financial Analysis
DuPont Analytics
StockV
MCDONALDS CORPORATION (MCD)
Price 21.440 07/25/03 FYE Dec
INT
MARGIN%
BURDEN
EBIT
EBT
-------
-------
Sales
EBIT
TAX
BURDEN%
T
ASSET
TURN
LEVERAGE
Sales
Assets
1 - ----
-------
-------
EBT
Assets
Equity
ROE
Acct
ROE
Rpt%
Adj%
Adj%
2002
13.31
0.81
59.69
0.66
2.35
9.04
8.08
17.12
2001
18.81
0.83
70.25
0.67
2.37
17.51
1.53
19.04
2000
23.37
0.87
68.60
0.67
2.26
20.99
0.00
20.99
1999
24.85
0.88
67.54
0.65
2.13
20.39
0.13
20.52
1998
22.05
0.84
67.18
0.65
2.08
16.93
2.39
19.32
1997
24.49
0.86
68.23
0.64
2.03
18.70
0.00
18.70
1996
24.48
0.86
69.86
0.65
1.98
18.97
0.17
19.14
1995
25.85
0.86
65.80
0.68
1.97
19.36
0.00
19.36
1994
26.59
0.85
64.90
0.65
1.95
18.61
0.00
18.61
1993
27.16
0.83
64.60
0.62
1.95
17.79
0.23
18.02
1992
25.81
0.79
66.20
0.62
2.15
17.87
0.00
17.87
1991
25.65
0.76
66.15
0.61
2.44
19.07
0.00
19.07
2.57
20.75
0.00
20.75
2.49
20.87
0.00
20.87
• First quarter
outperformed
2002
25.05 2003 analytics
0.75
64.37
0.67
1990
1989
24.55
0.78
62.80
0.70
McDonald’s
Financial Analysis
First Call FY1 & FY2 Revision Trend
StockVal®
MCDONALDS CORPORATION (MCD)
FY1 DEC 2003
CURRENT EST 1.33 DOWN 17.90% FROM JUL 2002
8%
0%
1.62
1.63
1.59
1.54
-8%
1.50
1.43
-16%
1.36
1.33
1.33
1.32
1.31
1.32
1.33
2/03
3/03
4/03
5/03
6/03
LAST
1.39
1.39
5/03
6/03
-24%
7/02
0%
1.77
8/02
1.77
9/02
1.77
10/02
11/02
12/02
1/03
FY2 DEC 2004
CURRENT EST 1.41 DOWN 20.34% FROM JUL 2002
1.77
1.77
1.77
-6%
1.64
-12%
-18%
1.41
-24%
7/02
8/02
9/02
10/02
11/02
12/02
1/03
2/03
1.39
3/03
1.37
4/03
• Since beginning of 2003, revisions estimates have remained steady
1.41
LAST
McDonald’s
Valuation Analysis
MCDONALDS CORPORATION (MCD) Price 21.4
1993
1994
1995
1996
1997
1998
1999
StockVal®
2000
2001
2002
2003
2004
1.6
1.4
HI
LO
ME
CU
1.2
1.0
1.49
0.59
1.10
0.88
0.8
0.6
0.4
PRICE / YEAR-FORWARD EARNINGS RELATIVE TO S&P CONSUMER DIS. SECTOR COMPOSITE A (SP-25)
1.8
07-23-1993
07-25-2003
1.6
1.4
HI
LO
ME
CU
1.2
1.0
1.72
0.67
1.16
0.87
0.9
0.8
0.7
07-23-1993
07-25-2003
0.6
PRICE RELATIVE TO S&P CONSUMER DIS. SECTOR COMPOSITE A (SP-25) M-Wtd
• Stock is currently undervalued
McDonald’s
Recommendation

Trim: 6.58%  3.25%

Risks:
– Growth due to company’s revitalizations could
be short-lived
– Foreign sales could continue to weaken
Recommendation
Buy: Wal-Mart 0%  1.73%
 Buy: Harley Davidson 0%  1.21%
 Trim: Altria 1.56%  .95%
 Trim: McDonald’s 6.58%  3.25%

– Overall, Consumer stocks decrease by 1% of
portfolio value.