RBC: July Will Be 'A Critical Month' For McDonald's

McDonald’s Corp MCD shareholders have had very little to cheer about in the past year or so, but a new report by RBC Capital Markets analyst David Palmer explains why RBC believes that McDonald’s shareholders could soon be loving what they see from the fast food giant this summer.

Return to value
McDonald’s recently launched a national value campaign called “Summer Lovin’,” and RBC thinks that the initiative will be a big hit for the company. According to the report, similar local campaigns centered on the New York City metro area have been successful for McDonalds, and RBC believes that improving the menu’s value is the best way for McDonald’s to turn around slumping sales numbers in the near-term.

According to the report, easing away from the Dollar Menu in 2012 allowed room for competitors such as Restaurant Brands International Inc QSR’s Burger King to swoop in and take share in the space with promotions such as its recent $1.49 10pc nugget or "2 for $5" promotions.

July is critical
RBC believes that July will serve as a major bellwether for the effectiveness of the company’s new value tier, and shareholders should pay close attention to the company’s July 23 earnings call for early indicators of a potential turnaround in McDonald’s U.S. business. RBS feels that the U.S. business, which represents about 40 percent of the company’s profits, will be critical to the company’s turnaround efforts.

Stock outlook
Regardless of the company’s poor performance in recent months, RBC is bullish on McDonal's stock. RBC currently has an Outperform rating on McDonald’s and a $110 target for the stock.