Peter Saleh Angles for McDonald’s Corporation to Keep Grabbing at More Market Share- Especially in the U.S.

BTIG's Peter Saleh likewise praises the rapid-fire worldwide momentum MCD showcased in its fourth quarter performance.


McDonald’s Corporation (NYSE:MCD) shares are falling almost 4% today. True, the fast food giant’s comp momentum was firing complete with a fourth quarter EPS outclass served up to Wall Street- and yet, investors are still hungry for more gains. As the company continues to capture increasing share from its competitors and entice former customers back from rival clutches of the likes of Panera and Chipotle, investor sentiment has been soaring under the wing of Chief Executive Steve Easterbrook.

BTIG analyst Peter Saleh maintains his bullish stance on the giant, believing that “positive global traffic leads to continued sales” for McDonald’s.

In reaction, the analyst reiterates a Buy rating on MCD stock with a $200 price target, which implies a close to 17% upside from current levels. (To watch Saleh’s track record, click here)

For the fourth quarter, the fast food giant hit $1.71 in adjusted EPS, “considerably” beating the analyst’s “in-line” expectations of $1.59, which Saleh attributes to standout comparable sales, improved restaurant as well as franchise margins, along with a dip in tax rate. Global same-store sales rose 5.5% for the quarter, outperforming the analyst’s estimate of 4.5% as well as the Street’s 4.9%, riding the strength of results across each of MCD’s three international segments. Every geography exhibited positive traffic for McDonald’s. Even domestic same-store sales jumped up 4.5%, aligning with the analyst’s forecast and “slightly” outperforming consensus of 4.3%, thanks to the company’s national beverage promotion, McPick 2, and the new Buttermilk Crispy Tenders.

“Delivery was also mentioned as a sales driver but it was lower on the list, results suggest modestly positive traffic as we estimate pricing of ~2.5%,” adds Saleh.

For the new year, the MCD management team calls for 1,000 unit openings, or 600 net, with 1% to 2% in domestic commodity inflation and roughly 2% in International Lead Markets.

Long-term, starting in 2019, the company hopes to reach 3% to 5% in system-wide sales gains coupled with mid-40% operating margin and EPS gains in the high-single digits.

Ultimately, “This quarter’s results once again demonstrated the global momentum McDonald’s is enjoying. We expect McDonald’s to continue to take market share, particularly in the U.S, driven by the introduction of its new value platform, Experience of the Future (EOTF), mobile ordering and upgrades to its food quality. We believe this comp momentum can continue for several years, as these initiatives are sales layers rather than promotions. On the call this morning, we would focus on the pace of EOTF rollout in the U.S., initial results from the new Dollar Menu launch and details on the expected impact of recent tax reform. Our EPS estimates are currently under review pending the conference call,” Saleh contends.

TipRanks indicates a strong bullish consensus betting on the fast food giant. Out of 15 analysts polled in the last 3 months, 12 are bullish on McDonald’s stock while 3 remain sidelined. With a return potential of nearly 12%, the stock’s consensus target price stands at $193.29, marking a nearly 12% upside from where the stock is currently trading.

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