Summary

  • Wells Fargo upgraded MCD to ‘overweight’ based on the company’s expected stability even in the face of slowing consumer demand.
  • In its latest financial report, McDonald’s reported that Digital Systemwide sales in the top six markets amounted to over US$8 billion in Q2 2023.
  • MCD’s consensus mean price target is US$328.59, which is 18.06% higher than its closing price on Thursday.

‘Burger giant McDonald’s (NYSE: MCD) received a rating upgrade from brokerage Wells Fargo. The broker upgraded MCD to ‘overweight’, leading to a 1% gain in the stock’s price on September 7, 2023.

The broker is also positive on KFC’s parent company Yum Brands (NYSE: YUM) as it believes both MCD and YUM are “well-positioned to weather a storm”. The storm here refers to a probable decline in consumer spending amid rising interest rates, gas prices and looming student loan payments.

As per EODHD/Others data, McDonald’s has a mean recommendation rating of 2 on a scale of one to five. Here, one signifies a ‘strong buy’ rating, while five represents a ‘strong sell’ rating. This rating is a cumulative result of the ratings given by 39 analysts.

MCD Price Chart; Image Source: MCD EODHD/Others

MCD closed at US$278.33 on Thursday, September 7, 2023. The stock hit its 52-week high of US$299.35 earlier this year on July 21, 2023.

Cheaper food items to potentially benefit McDonald’s, saysWells Fargo

Broker Wells Fargo stated cheaper food items and menu innovation as the reasons behind its upgrade. The broker also added that the company could also benefit from its digital strength even as industry-wide trends show a slowdown.

Incidentally, McDonald’s reported, in its latest financial release, that its Digital Systemwide sales in the top six markets amounted to over US$8 billion in Q2 2023. These digital sales made up nearly 40% of their Systemwide sales

Wells Fargo analyst Zachary Fadem stated that another factor acting in favor of MCD is the company’s ongoing rollout of improvements to its burgers.

The broker also lauded McDonald’s innovative streak and mentioned that the better-than-expected performance of international markets could be another source of advantage for the company.

Around 75% analysts believe MCD is a ‘buy’ or ‘strong buy’- EODHD/Others data

EODHD/Others data also shows that of the 39 analysts covering MCD, 11 believe it is a ‘strong buy’, 18 believe it to be a ‘buy’ and 10 have given it a ‘hold’ rating. Meanwhile, the consensus mean price target on MCD is US$328.59, which is 18.06% higher than its closing price on Thursday.

Broker Kalinowski Equity Research also upgraded its rating on the stock to ‘buy’ on September 5, 2023. Meanwhile, Cleveland Research also upgraded MCD to ‘buy’ in late August.

Alternatively, Raymond James downgraded the stock to ‘market perform’ in July 2023 and Baptista Research also reduced its rating to ‘hold’ in August 2023.

For Q2 2023, MCD reported an 11.7% increase in global comparable sales, with U.S. sales increasing by 10.3%. Meanwhile, the restaurant operator’s consolidated revenue was 14% higher in Q2 2023 at US$6.49 billion and its operating income was US$3.104 billion during the quarter.

MCD’s diluted EPS was US$3.15 in Q2 2023, a 95% increase from Q2 2022’s diluted EPS of US$1.6. Based on Thursday’s closing price of US$278.33, MCD had a P/E ratio of 25.36x. As at the close of trade on Thursday, the stock price grew 5.62% on a YTD basis and 1.05% intraday.