4 McDonald's Analysts On Q3 Beat, Golden Arches Analyst Day

Global fast food giant Mcdonald's Corp MCD reported third-quarter results Monday and laid out a vision of its future.

The McDonald's Analysts

Stephens analyst James Rutherford maintains an Overweight rating on McDonald's with an unchanged $250 price target.

Raymond James analyst Brian Vaccaro maintains a Market Perform rating. 

Cowen analyst Andrew Charles maintains an Outperform on McDonald's with an unchanged $250 price target.

KeyBanc Capital Markets analyst Eric Gonzalez maintains an Overweight on McDonald's with a price target lifted from $225 to $235.

Stephens Recaps McDonald's Q3 

McDonald's reported third quarter same-stores sales growth of 4.6% in the U.S. but a 4.4% decline in the International Operated markets and 10.1% drop in International Developmental markets, Rutherford said in a note.

These figures were in line with the Street's expectations and consistent with management's pre-release, the analyst said. 

Revenue of $5.418 billion beat consensus estimates of $5.345 billion, while EPS of $2.22 compared favorably to the Street's estimate of $1.92.

McDonald's noted during its conference call that U.S. comps for October were higher by a mid-single-digit and represent a "notable slowdown" from September's low-double-digit growth, Rutherford said.

This was expected, and investors may see further "choppiness" in results going forward amid growing COVID-19 infection rates and restrictions worldwide.

Related Link: McDonald's CEO Talks Plant-Based Burger

Raymond James On New McDonald's Growth Strategy

In conjunction with McDonald's third-quarter report, the fast food company laid out a new growth strategy dubbed "Accelerating the Arches," Vaccaro said in a note.

The main takeaways are:

• Evolving and maximizing a marketing strategy.
• Improving core menu items like chicken sandwiches and McNugget flavor extensions.
• A new "MyMcDonald's" digital experience that includes a loyalty program and increased personalization.
• Testing new strategies to speed up the drive-thru and digital orders.

Cowen's 3 Key Takeaways On McDonald's

McDonald's served investors a "compelling" playbook to support U.S. comp growth in 2021 and beyond, Charles said in a note. There is reason to believe that sustained U.S. sales growth can offset increases in capital expenditures and G&A expenses, the analyst said. 

He named three takeaways from the strategy:

• Celebrity tie-ins to attract Gen Z customers will continue, with a new partnership expected to launch by the end of 2020 and another in early 2021.
• McDonald's 2019 acquisition of artificial intelligence speech recognition company Apprente will play a role in 2021. Specifically, the use of an AI drive-thru ordering system could help with faster throughput and potentially drive higher sales through selling opportunities.
• McDonald's is looking at its global business to see where it can improve the U.S. business. For example, burger enhancement learnings from Canada and Australia or chicken sandwich launches in the Netherlands and Germany can be applied to future U.S. menu changes.

KeyBanc: Investing For Long-Term Gains

While McDonald's initiatives will likely limit any free cash flow growth in the near-term, it will sustain a longer-term competitive advantage, Gonzalez said in a note.

McDonald's likely recognizes that a constant level of investment is required to stay ahead of the competition, the analyst said. 

McDonald's is expected to leverage the popularity of its "Famous Orders" marketing campaign with new initiatives, he said.

The next celebrity collaboration is likely to come before the end of 2020 and may focus on a family bundle, Gonzalez said. 

A new Crispy Chicken Sandwich should come out toward the end of the first quarter of 2021 or in the early second quarter, the analyst said. 

McDonald's wants to make sure it has an adequate supply and avoids the stock-outs that were seen earlier this fall, according to KeyBanc. 

MCD Price Action

Shares of McDonald's were trading down slightly at $213.01 at last check Tuesday. 

Courtesy photo.