McDonald's Corporation (MCD - Free Report) is riding high on impressive earnings surprise history, various sales and digital initiatives as well as positive comparable sales. In the past three months, the stock has gained 17.7% compared with the industry’s 14.2% rally. Let’s delve deeper.
McDonald’s reported better-than-expected earnings for the 17th straight quarter when it posted third-quarter 2018 results. It also delivered an average four-quarter positive earnings surprise of 6.1%. Furthermore, increased focus on delivery and accelerated deployment of Experience of the Future restaurants in the United States should boost the company’s performance.
Meanwhile, the Zacks Rank #2 (Buy) company’s sales boosting initiatives are driving global comparable sales (comps). In third-quarter 2018, comps grew 4.2%, marking its 13th straight quarter of positive comps. Moreover, U.S comps were up 2.4% in the period. In order to drive comps in the United States, representing about 40% of the company’s business, McDonald’s aims at improving its focus on growing guest traffic. In this regard, the company is accentuating on operational excellence, product innovation, offering a value menu and rolling out more limited-time offerings.
McDonald’s strategic efforts in the International Lead segment and High Growth markets continue to drive comps higher. In third-quarter 2018, the International Lead segment and High Growth markets witnessed comps growth of 5.4% and 4.6%, respectively. Comps growth in international markets was driven by robust sales in the United Kingdom, Australia and France. Growth in High Growth markets can be attributed to strong performance in Italy and the Netherlands as well as positive results across majority of the segments.
Furthermore, the company is consistently trying to improve its performance in the International Lead Markets, including Australia, Canada, France, Germany and the UK. The company intends to drive comps growth in these markets through introduction of value meals, customizing the menu to local customer tastes, reimaging of restaurants, efficient marketing and promotions, improved service and increased convenience via delivery.
Impressively, McDonald’s is the world’s largest chain of fast-food restaurants with presence in more than 100 countries. Its offerings have reached the billion-dollar brand status through sustained product innovation and geographic expansion. With an almost 10% share of the global informal-eating-out market, there is ample scope for it to grow in the future as it boasts a scale advantage compared to its peers.
Growing guest counts remains the company’s top priority and it intends to regain customers by focusing on food quality, convenience and value.
Other Stocks to Consider
Some other top-ranked stocks, which warrant a look in the same space, include Dave & Buster's Entertainment, Inc. (PLAY - Free Report) , Darden Restaurants, Inc. (DRI - Free Report) and Dunkin' Brands Group, Inc. (DNKN - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dave & Buster has reported better-than-expected earnings over the past four quarters, with an average of 13.7%.
Darden Restaurants has an impressive long-term earnings growth rate of 9.3%.
Dunkin' Brands Group has reported better-than-expected earnings over the past four quarters, with an average of 9.6%.
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