McDonald’s Serves Up Better-Than-Expected Results In 1Q; Street Says Buy

McDonald’s Corp.’s (MCD) first quarter results came in ahead of expectations. The international fast food chain’s revenues rose 9% year-on-year to $5.1 billion and came in ahead of analysts’ estimates of $5 billion.

The company reported non-GAAP diluted earnings of $1.92 per share, up 27% year-on-year and beating consensus estimates of $1.81 per share.

McDonald’s President and CEO Chris Kempczinski said, “Our first quarter 2021 global comparable sales and revenues surpassed first quarter 2019 levels, even as resurgences and operating restrictions persist in many parts of the world. I continue to be inspired by the resilience of our crew members, franchisees, suppliers, and company employees as we lead with our values and stay true to our purpose of feeding and fostering communities.”

Comparable sales rose 7.5% globally driven by a rising trend across all segments. Comparable store sales in the United States grew 13.6% year-over-year, while the International Operated and International Developmental Licensed segments grew 0.6% and 6.4%, respectively.(See McDonald’s Corp stock analysis on TipRanks)

Following the earnings, Truist Securities analyst Jake Bartlett raised the price target from $243 to $255 and reiterated a Buy on the stock. Bartlett said in a research note to investors, “US SSS [same store sales] accelerated to +13.6% in 1Q21 and management expects the 2-year trend (+13.7%) to hold in 2Q21, implying SSS of ~+22.5%. This is ahead of the summer launch of its new loyalty program which has tested “incredibly well.”

“The IOM [International Operated Markets] market continues to trail (SSS of +0.6%), but we expect a similar recovery to the US when dining rooms re-open (~50% currently). MCD expects higher check size to persist post-COVD, a positive for the fast food segment as a whole,” Bartlett added.

Overall, consensus among analysts is that MCD is a Strong Buy based on 16 Buys and 3 Holds. The average analyst price target of $253.22 implies upside potential of about 7.7% from current levels.

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