McDonald's Keeps On Cooking
McDonald’s Corp. (MCD - Analyst Report) reported much stronger-than-expected August same-store sales numbers, lapping very strong comparables and surpassing our expectations. We continue to view the stock as a good defensive investment and expect steady mid-to-high-single digit earnings growth, fueled by margin expansion and a trade-down from casual dining in an economically weakening Europe, unit growth in AMPEA, the rollout of high-end coffees system-wide, and share buybacks.
We note that worse-than-expected headwinds from a strengthening dollar, rising beef prices and slowing Asian economies pose downside risks to our estimates. Nevertheless, we think this stock provides relative safety and moderate growth and yield in a turbulent environment and exposure to faster-growing international markets. Our rating remains Buy with a six-month target price of $68.