McDonald’s investors hungry for more after turnaround




By Leslie Patton

McDonald’s, three years into a dramatic turnaround effort, has left investors hungry for more.

Though the company matched Wall Street estimates for US comparable sales growth last quarter, the shares slipped as much as 1.9% at one stage in the latest trading session — a sign the bar has been raised for the fast-food giant.

After kicking off a rally in 2015, McDonald’s now carries a rich valuation compared with its peers, Bloomberg Intelligence analyst Mike Halen said. Investors also have grown accustomed to seeing McDonald’s beat estimates, rather than merely matching them. The last time the company didn’t exceed US comparable sales projections was July 2016.

“Momentum slowed a little bit in the fourth quarter on a two-year basis,” he said, and added: “The stock is down because it’s been on an absolute tear. Stocks don’t go up forever.”

McDonald’s US strategy also has increasingly become a race to the bottom. The world’s largest restaurant chain relied more heavily on a discounting push to maintain sales in its latest quarter.

The Illinois-based company has touted drink specials and sandwich promotions, and more recently revamped its Dollar Menu. That move is showing early signs of attracting more US customers.

The question now is how long McDonald’s can fuel growth by appealing to Americans’ penny-pinching instincts — especially as competitors fight back. Taco Bell and other rivals are rolling out their own items for as little as $1, making the fast-food industry even more cutthroat.

The shares had been up 3.3% this year. And they gained in each of the three previous years, fueled by chief executive officer Steve Easterbrook’s comeback bid. The Golden Arches are still outshining most of the restaurant industry. Last quarter, US comparable sales climbed 4.5% — a result most chains would envy.

Globally, McDonald’s exceeded estimates. Its lead international markets — a category that includes the UK and Canada — gained 6% on that basis. Overall, the sales climbed 5.5%.

McDonald’s profit also handily beat analysts’ estimates.

Mr Easterbrook believes the company can stay on track by touting convenience, menu variety and affordable prices. He’s also betting that a new mobile app and the rollout of delivery service can keep customers loyal.

“We are confident we will accelerate our momentum by capitalizing on our strong business model,” he said.

- Bloomberg

More in this Section

UK law firm adds to Irish presenceUK law firm adds to Irish presence

Shoppers abandoning Bandon due to traffic chaos and lack of parkingShoppers abandoning Bandon due to traffic chaos and lack of parking

Membership of Cern ‘will result in millions being put into Irish economy’Membership of Cern ‘will result in millions being put into Irish economy’

Wetherspoons boss Tim Martin hits out at corporate governance rulesWetherspoons boss Tim Martin hits out at corporate governance rules


Lifestyle

Aileen Lee meets Christina Kenny - co-founder and design director of Lamb Design - to talk about her work and inspirations.Christina Kenny of Lamb Design: ‘I love bringing the outside in and inside out’

Tyrone designer Sharon Wauchob on her career and the worth of luxury fastion. By Paul McLachen.From Marc Jacobs to her own label, Tyrone designer Sharon Wauchob on her life in fashion

The recent sentencing of two teenage boys for the murder of Ana Kriégel has once again brought the issue of pornography into public discourse. The details of the case, which are finally coming into public knowledge, illuminate some very worrying trends that are pervasive in the modern adolescent world and as parents and indeed as a society we can no longer languish in complacency.Learning Points: Hardcore porn can pollute our children’s minds

If children are confident in interacting with others it takes away so much stress and social anxiety for them. Not too long ago, my daughter Joan and I were out with friends at a restaurant and we wanted extra water and a few other bits and Joan volunteered to go up and ask the waiter for them. My friend was really surprised at this and said that none of her children would willingly do that.Mum’s the word: We should look for chances to strengthen our kids’ social skills

More From The Irish Examiner