On Wednesday, Piper Sandler reaffirmed its neutral ratings on several major restaurant stocks, including McDonald's Corporation (NYSE:NYSE:MCD), Domino's Pizza, Inc. (NYSE:NYSE:DPZ), Yum! Brands, Inc. (NYSE:NYSE:YUM), and Restaurant Brands International Inc. (NYSE:NYSE:QSR).
McDonald's, with its $209 billion market cap and solid 2.4% dividend yield, has maintained steady growth with revenue increasing 3.7% over the last twelve months. The firm has maintained this stance throughout the year, acknowledging that while there has been variability within the sector, their overall position has been appropriate.
The analyst from Piper Sandler expressed a view that the risk-reward balance in the restaurant sub-sector remains relatively even, with no immediate impetus to alter their ratings. According to InvestingPro analysis, McDonald's is currently trading near its Fair Value, with analyst targets ranging from $280 to $360.
From a relative value perspective, Yum! Brands was singled out as the preferred stock among the neutrally-rated global franchisors, particularly when considering a 12-month investment horizon.Want deeper insights? InvestingPro subscribers have access to over 30 additional financial metrics and exclusive ProTips for McDonald's, helping investors make more informed decisions.
In contrast to the neutral-rated companies, Starbucks Corporation (NASDAQ:SBUX) was highlighted as Piper Sandler's top pick within their restaurant coverage universe. The firm holds an overweight rating on Starbucks, indicating a strong conviction that the coffeehouse chain will outperform its quick-service peers over the next two to three years. This optimism is based on the firm's assessments outlined in their note, despite the inherent challenges in forecasting short-term share price movements.
The analyst's comments suggest that while near-term market performance is difficult to predict with certainty, there is a belief in the long-term potential of Starbucks to exceed the performance of the other quick-service restaurant names they cover. Piper Sandler did not announce any changes to their price targets or ratings at this time, suggesting a watchful approach to the sector as it continues to navigate the market.
In other recent news, McDonald's has seen several significant developments. The U.S. Centers for Disease Control and Prevention (CDC) has officially closed the case on an E. coli outbreak linked to the company's Quarter Pounder hamburgers, which had affected 104 individuals and led to 34 hospitalizations. McDonald's has since resumed sales of the popular menu item after ensuring ingredient safety and has reintroduced slivered onions from a different supplier.
Additionally, McDonald's USA is launching a new value menu called McValue in 2025. The platform will offer a variety of deals, including current favorites like the $5 Meal Deal and new options such as the Buy One, Add One for $1 deal. The McValue menu is a result of collaboration with franchisees and is designed to offer savings on both personalized orders and popular items.
On the financial side, McDonald's third-quarter performance for 2024 showed resilience despite industry-wide challenges. The company reported a slight increase in adjusted earnings per share and a 6% dividend increase, reflecting confidence in its long-term prospects. The positive U.S. comparable sales were driven by value offerings and menu innovation, even amid international market pressures and an E. coli incident.
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