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Is It Time to Buy McDonald's (MCD) Stock?

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McDonald's (MCD - Free Report) shares popped over 2.2% Tuesday to help the fast-food firm extend its recent climb. Now, on the back of some executive-level changes and positive analyst sentiment, should investors consider buying MCD stock?

Recent News 

McDonald’s announced Monday that President, International Lead Markets & Chief Restaurant Officer Doug Goare is set to retire at the end of the year after 40 years with the company. The restaurant chain said Goare’s retirement will see McDonald’s continue to move further toward a franchised structure. The company is also set to “operate under a new organizational structure” starting on January 1. 

Investors should familiarize themselves with McDonald’s Velocity Growth Plan since most company announcements mention the initiative. Launched in March 2017, its new long-term growth strategy aims to see the fast-food chain boost its digital capabilities and jump into delivery. The company also plans to have most of its traditional free-standing U.S. restaurants “modernized to reflect the Experience of the Future” by the end of 2020.

The fast-food giant referenced its Velocity Growth Plan late last week when raised its quarterly dividend from $1.01 to $1.16 per share. Meanwhile, some analysts have grown more bullish about McDonald’s. “It really won't take much until you get back up above $166, which I feel is going to fuel a move to right near $190 in the stock, and so it's still difficult to be real bearish," Mark Newton of Newton Advisors told CNBC last Friday.

Stock Price Movement

Shares of MCD sunk after they reached a new all-time high of $178.70 in January. McDonald’s has seen its stock price climb since its early March lows. MCD stock closed regular trading Tuesday up 1.90% to $166.42 per share—a level it last closed above in June. It’s worth noting that Newton’s approximately $190 per share projection gives McDonald’s stock room for 14% growth.

Investors will see that shares of MCD have climbed over the last three years. “It's important to really put this into bigger perspective and look at how the stock has trended since the rise started in 2015, the level of its most recent longer-term lows,” Newton continued.

 

More recently, we can see that MCD stock has crushed its industry, which includes Starbucks (SBUX - Free Report) , Dunkin' (DNKN - Free Report) , YUM! (YUM - Free Report) , and Domino's (DPZ - Free Report) , over the last two years. McDonald’s stock has also surpassed the S&P 500 over this stretch.

 

 

 

Outlook

Last quarter, McDonald’s global comparable sales jumped 4%. This marked 12 consecutive quarters of positive comps. Looking ahead, McDonald's expects to see systemwide sales growth between 3% to 5% starting in 2019. The restaurant giant also projects to post an operating margin in the mid-40% range.

Meanwhile, our current Zacks Consensus Estimate is calling for the company’s adjusted Q3 earnings to jump by 13.1% to $1.99 per share. McDonald's fiscal year EPS figure is projected to expand by 14.9%. The company has also experienced positive earnings estimate revision activity for fiscal 2018 over the last 60 days.

McDonald’s is currently a Zacks Rank #3 (Hold). MCD stock is also trading at 20.3X forward 12-month Zacks Consensus EPS estimates, which represents a discount compared to its industry’s 21.5X average.

 

 

Furthermore, McDonald's is trading below its two-year median of 20.8X and its two-year high of 26.6X. Therefore, it might not be a bad time to think about buying MCD stock at the moment.

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