McDonald's Still Offers A Treat -- Ahead Of The Tape
January 25 2016 - 3:02AM
Dow Jones News
(FROM THE WALL STREET JOURNAL 1/25/16)
By Steven Russolillo
McDonald's Corp. chief Steve Easterbrook has accomplished a lot
nearly one year into the job. There is reason to believe the
positive momentum can continue.
From all-day breakfast and other menu changes to improved
operations and better customer service, a number of Mr.
Easterbrook's changes have been well received, while pleasantly
surprising Wall Street.
For instance, analysts a year ago sported an average 12-month
price target on McDonald's of $95. Only one-fifth of them had buy
ratings.
Much has changed. The stock now trades near $120 after surging
26% last year. And nearly half of analysts rate it a buy.
The rally caught fire in October as investors cheered a strong
showing from U.S. restaurants. That contributed to a 4% gain in
global same-store sales, the best for McDonald's in more than three
years.
More good news is expected for the quarter ended in December.
Analysts polled by FactSet forecast fourth-quarter earnings of
$1.23 a share, up 9% from a year ago. That has been raised from
$1.17 in September.
Global same-store sales are expected to rise 3.2%, thanks in
part to the early success of all-day breakfast.
In a study published last month, NPD Group Inc. found about
one-third of customers who purchased breakfast items in the
afternoon or later hadn't actually been to a McDonald's prior to
the all-day breakfast launch.
Furthermore, many competitors are struggling at a time when the
Golden Arches are bouncing back.Chipotle Mexican Grill Inc.'s
difficulties are well documented. Yum Brands Inc., which operates
KFC and Pizza Hut, has lost a quarter of its market value since May
as it embarks on splitting off its China unit.
Even relative upstarts such as Potbelly Corp. and Noodles &
Co., which were expected to eat many of the larger chains' lunch,
have struggled recently.
And while McDonald's shares aren't cheap, they still trade at a
discount relative to many of its competitors, including Wendy's
Co., Panera Bread Co. and Chipotle.
For McDonald's investors, there's still golden in them thar
arches.
(END) Dow Jones Newswires
January 25, 2016 02:47 ET (07:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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