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McDonald's shares rated Buy by Deutsche Bank amid mixed Q3 but positive US trends

EditorAhmed Abdulazez Abdulkadir
Published 31/10/2024, 02:52 am
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On Wednesday, Deutsche Bank (ETR:DBKGn) maintained its Buy rating and $345.00 price target for McDonald's Corporation (NYSE:MCD). The firm's analyst highlighted McDonald's third-quarter performance, which showed a mixed outcome. The fast-food giant reported a return to positive same-store sales (SSS) in the United States, although international SSS remained negative. The earnings per share (EPS) exceeded expectations, largely due to effective cost management.

In the United States, McDonald's has seen nearly mid-single-digit (MSD) growth in SSS during the first three weeks of October. This improvement is seen as a sign of gaining momentum, despite recent challenges including a food safety incident that negatively impacted sales and traffic. The company's strategies for sustaining this momentum include value offerings such as a $5 meal deal and a national value platform set to launch in the first quarter of 2025, along with new product innovations like the Chicken Big Mac and Snack Wraps expected to be introduced in 2025.

The analyst expressed confidence in McDonald's recovery on the international front, anticipating a rebound as the macroeconomic situation improves and the company's initiatives help to increase market share. Furthermore, McDonald's has reaffirmed its global unit growth outlook, which is seen as a positive sign, especially when considered a risk for its global peers.

Despite facing near-term challenges, Deutsche Bank is optimistic about McDonald's prospects. The firm believes that McDonald's is well-equipped to outperform in what is expected to continue as a challenging and value-driven market environment. The company's recent uptick in the U.S. SSS and strategic plans for the future are seen as key factors supporting this outlook.

In other recent news, McDonald's Corporation reported a significant 1.5% drop in global sales for the third quarter, marking the largest decrease in four years. Despite these challenges, McDonald's managed to surpass profit expectations with earnings of $3.23 per share on an adjusted basis, slightly higher than the $3.20 forecasted by analysts.

The company also faced an E. coli outbreak linked to its Quarter Pounder burgers, which temporarily halted sales of the product in several U.S. locations. Goldman Sachs (NYSE:GS) maintained a Neutral rating on McDonald's stock, while Truist Securities adjusted its price target for McDonald's shares to $342 from $350, maintaining a Buy rating. Analysts from BTIG maintained a Neutral stance on McDonald's shares, citing uncertainties in projecting significant earnings per share (EPS) growth due to current market conditions.

InvestingPro Insights

To complement Deutsche Bank's analysis, InvestingPro data provides additional context for McDonald's financial position and market performance. The company's market capitalization stands at $211.62 billion, reflecting its significant presence in the fast-food industry. McDonald's P/E ratio of 26.06 suggests that investors are willing to pay a premium for its shares, possibly due to its strong brand and market position.

InvestingPro Tips highlight McDonald's impressive dividend history, having raised its dividend for 49 consecutive years. This consistent dividend growth aligns with the company's stable business model and ability to generate cash flow, even in challenging market conditions. Additionally, McDonald's stock generally trades with low price volatility, which may appeal to investors seeking stability in their portfolio.

The company's revenue growth of 6.46% over the last twelve months and an operating income margin of 45.67% demonstrate McDonald's ability to maintain profitability while expanding its business. These metrics support Deutsche Bank's optimistic outlook on McDonald's ability to navigate the current market environment and potentially outperform its peers.

For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for McDonald's, providing a deeper understanding of the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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