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Here's Why Investors Should Retain McDonald's (MCD) Stock Now
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McDonald's Corporation (MCD - Free Report) will likely benefit from solid comps growth, digital efforts, and a loyalty program. Also, the focus on expansion initiatives bodes well. However, a challenging macro environment is a concern.
Let’s discuss the factors highlighting why investors should retain the stock for the time being.
Major Growth Drivers
McDonald's continues to impress investors with robust comps growth. In third-quarter 2023, global comps increased 8.8% compared with a rise of 9.5% reported in the prior-year quarter. In the third quarter, comps in the United States, international operated markets and international developmental licensed segment rose 8.1%, 8.3% and 10.5%, respectively. The company gained from robust performance in most markets, led by the U.K. and Germany. McDonald’s’ comps in the quarter benefited from a menu price increase, positive guest counts and marketing initiatives. This and the continued digital and delivery growth contributed to the upside.
The company is focused on digitalization to drive growth. During the third quarter of 2023, MCD reported accelerated digital engagement across the markets. It reported more frequent visits and incremental sales on the back of tailored loyalty messages, a strong lineup of mobile app offers and content offerings. During the third quarter of 2023, digital dales (from the top six markets) came in at $9 billion, contributing more than 40% to the company’s system-wide sales. Given a rise in digital adoption, the company is optimistic and anticipates the initiatives to drive sales and average checks in the upcoming periods.
McDonald's continues to focus on the loyalty program to drive sales and average checks. It believes the program will help retain existing customers and expand the customer base. During the third quarter of 2023, MCD's digital app boosted fan engagement and loyalty through its exclusive MONOPOLY campaigns in multiple markets. In Australia, MCD's MONOPOLY campaign drove record digital sales with higher app registrations and game piece redemptions during the quarter. The U.K. saw MONOPOLY's 17th consecutive year featuring a double-peel option for app engagement. Spain had similar success, leveraging similar app features, resulting in increased downloads and registrations. The company witnessed impressive customer engagement with over 57 million 90-day active members across its top six markets.
McDonald’s believes that there is a huge opportunity to grow all its brands globally by expanding its presence in existing markets and entering new ones. Its expansion efforts continue to drive performance. Despite unfavorable scenarios, the company continues to expand its global footprint. It is planning to open nearly 1,900 restaurants globally in 2023, which includes 400 openings in the United States and 1500 from the international operated markets (IOM) segment. The company expects net restaurant unit expansion to contribute nearly 1.5% to 2023 systemwide sales growth in constant currency.
Concerns
Image Source: Zacks Investment Research
In the past three months, shares of the company have gained 3.3% compared with the Retail - Restaurants industry’s 4.1% growth. A challenging macro environment mainly caused the downside.
The company is persistently shouldering higher expenses, which have been detrimental to margins. During the third quarter of 2023, McDonald’s company-operated restaurant expenses came in at $2,135 million compared with $1,779.6 million reported in the prior-year quarter. To enhance its successful Accelerating the Arches strategy, the company incurred various expenses (restructuring charges). It encountered challenges due to a tough macroeconomic landscape, notably affected by increasing interest rates. McDonald’s anticipates the macroeconomic challenges to persist in the fourth quarter.
Zacks Rank & Key Picks
McDonald's currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Retail-Wholesale sector include:
Arcos Dorados Holdings Inc. (ARCO - Free Report) sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 28.3% on average. Shares of ARCO have increased by 53.2% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ARCO’s 2024 sales and earnings per share (EPS) indicates 10.6% and 15.5% growth, respectively, from the year-ago period’s levels.
Brinker International, Inc. (EAT - Free Report) sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 223.6%, on average. Shares of EAT have increased 23.4% in the past year.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates a 5.1% and a 26.2% growth, respectively, from the year-ago period’s levels.
Wingstop Inc. (WING - Free Report) sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 28.9%, on average. The stock has gained 64.7% in the past year.
The Zacks Consensus Estimate for Wingstop’s 2024 sales and EPS suggests rises of 15.6% and 17.5%, respectively, from the year-ago period’s levels.
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Here's Why Investors Should Retain McDonald's (MCD) Stock Now
McDonald's Corporation (MCD - Free Report) will likely benefit from solid comps growth, digital efforts, and a loyalty program. Also, the focus on expansion initiatives bodes well. However, a challenging macro environment is a concern.
Let’s discuss the factors highlighting why investors should retain the stock for the time being.
Major Growth Drivers
McDonald's continues to impress investors with robust comps growth. In third-quarter 2023, global comps increased 8.8% compared with a rise of 9.5% reported in the prior-year quarter. In the third quarter, comps in the United States, international operated markets and international developmental licensed segment rose 8.1%, 8.3% and 10.5%, respectively. The company gained from robust performance in most markets, led by the U.K. and Germany. McDonald’s’ comps in the quarter benefited from a menu price increase, positive guest counts and marketing initiatives. This and the continued digital and delivery growth contributed to the upside.
The company is focused on digitalization to drive growth. During the third quarter of 2023, MCD reported accelerated digital engagement across the markets. It reported more frequent visits and incremental sales on the back of tailored loyalty messages, a strong lineup of mobile app offers and content offerings. During the third quarter of 2023, digital dales (from the top six markets) came in at $9 billion, contributing more than 40% to the company’s system-wide sales. Given a rise in digital adoption, the company is optimistic and anticipates the initiatives to drive sales and average checks in the upcoming periods.
McDonald's continues to focus on the loyalty program to drive sales and average checks. It believes the program will help retain existing customers and expand the customer base. During the third quarter of 2023, MCD's digital app boosted fan engagement and loyalty through its exclusive MONOPOLY campaigns in multiple markets. In Australia, MCD's MONOPOLY campaign drove record digital sales with higher app registrations and game piece redemptions during the quarter. The U.K. saw MONOPOLY's 17th consecutive year featuring a double-peel option for app engagement. Spain had similar success, leveraging similar app features, resulting in increased downloads and registrations. The company witnessed impressive customer engagement with over 57 million 90-day active members across its top six markets.
McDonald’s believes that there is a huge opportunity to grow all its brands globally by expanding its presence in existing markets and entering new ones. Its expansion efforts continue to drive performance. Despite unfavorable scenarios, the company continues to expand its global footprint. It is planning to open nearly 1,900 restaurants globally in 2023, which includes 400 openings in the United States and 1500 from the international operated markets (IOM) segment. The company expects net restaurant unit expansion to contribute nearly 1.5% to 2023 systemwide sales growth in constant currency.
Concerns
Image Source: Zacks Investment Research
In the past three months, shares of the company have gained 3.3% compared with the Retail - Restaurants industry’s 4.1% growth. A challenging macro environment mainly caused the downside.
The company is persistently shouldering higher expenses, which have been detrimental to margins. During the third quarter of 2023, McDonald’s company-operated restaurant expenses came in at $2,135 million compared with $1,779.6 million reported in the prior-year quarter. To enhance its successful Accelerating the Arches strategy, the company incurred various expenses (restructuring charges). It encountered challenges due to a tough macroeconomic landscape, notably affected by increasing interest rates. McDonald’s anticipates the macroeconomic challenges to persist in the fourth quarter.
Zacks Rank & Key Picks
McDonald's currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Retail-Wholesale sector include:
Arcos Dorados Holdings Inc. (ARCO - Free Report) sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 28.3% on average. Shares of ARCO have increased by 53.2% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ARCO’s 2024 sales and earnings per share (EPS) indicates 10.6% and 15.5% growth, respectively, from the year-ago period’s levels.
Brinker International, Inc. (EAT - Free Report) sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 223.6%, on average. Shares of EAT have increased 23.4% in the past year.
The Zacks Consensus Estimate for EAT’s 2024 sales and EPS indicates a 5.1% and a 26.2% growth, respectively, from the year-ago period’s levels.
Wingstop Inc. (WING - Free Report) sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 28.9%, on average. The stock has gained 64.7% in the past year.
The Zacks Consensus Estimate for Wingstop’s 2024 sales and EPS suggests rises of 15.6% and 17.5%, respectively, from the year-ago period’s levels.