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McDonald's (MCD) Outpaces Industry YTD: More Upside Left?
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McDonald's Corporation (MCD - Free Report) is likely to benefit from robust comps growth, digital initiatives and solid-expansion efforts. Also, its focus on strategic efforts to attract customers in international markets bodes well.
Year to date, shares of McDonald's have gained 10.8% compared with the industry’s 8.8% growth. The price performance was backed by a solid earnings surprise history. McDonald's earnings surpassed the Zacks Consensus Estimate in five of the trailing six quarters. Earnings estimates for 2023 have moved up 0.2% in the past 30 days. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Let’s discuss the factors that highlight why investors should retain the stock for the time being.
Key Growth Drivers
The company continues to impress investors with robust comps growth. In first-quarter 2023, global comps increased 12.6% compared with a rise of 11.8% reported in the prior-year quarter. This marks the nineth consecutive quarter of comps growth. In the first quarter, comps in the United States, international operated markets and international developmental licensed segment rose 12.6% each, respectively. The company benefited from robust performance in Germany, the U.K., France, Australia and Canada. McDonald’s’ comps in the quarter benefited from a menu price increase, positive guest counts and marketing initiatives. This and the continued digital and delivery growth contributed to the upside.
The company's strategic efforts in the international markets continue to drive comps higher. It is constantly trying to improve its performance in the International Operated Markets, including Australia, Canada, France, Germany and the U.K. The company intends to drive comps growth in these markets through the introduction of value meals, customizing the menu to local customer tastes, reimaging of restaurants, efficient marketing and promotions, improved service and increased convenience via delivery and digitalized presence.
McDonald's continues to gain from robust digitalization. During the first quarter, the company reported accelerated digital engagement across the markets. It reported more frequent visits and incremental sales on the back of tailored loyalty messages, a strong lineup of mobile app offers and content offerings. During the first quarter of 2023, digital sales (from top six markets) rose 30% year over year to $7.5 billion. This contributed almost 40% to MCD’s system-wide sales. Given a rise in digital adoption, the company is optimistic and anticipates the initiatives to drive sales and average checks in the upcoming periods.
The company is focused on expanding its global footprint to drive growth. It believes that there is a huge opportunity to grow all its brands globally by expanding its presence in existing markets and entering new ones. Its expansion efforts continue to drive performance. It is planning to open more than 1,900 restaurants globally in 2023, including 400 openings in the United States and the IOM segment and 1,500 (including nearly 900 in China) inaugurations in the IDL market. The company expects net restaurant unit expansion to contribute nearly 1.5% to 2023 systemwide sales growth in constant currencies.
Zacks Rank & Other Key Picks
McDonald's currently sports a Zacks Rank #2 (Buy).
Dave & Buster's Entertainment, Inc. (PLAY - Free Report) sports a Zacks Rank #1 (Strong Buy). PLAY has a trailing four-quarter earnings surprise of 6.8%, on average. Shares of PLAY have gained 38.2% in the past year.
The Zacks Consensus Estimate for PLAY’s 2024 sales and EPS indicates a rise of 16.9% and 28%, respectively, from the year-ago period’s levels.
Abercrombie & Fitch Co. (ANF - Free Report) flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 480.6%, on average. Shares of ANF have increased 114.2% in the past year.
The Zacks Consensus Estimate for ANF’s 2024 sales and EPS indicates a rise of 3.4% and 732%, respectively, from the year-ago period’s levels.
BJ's Restaurants, Inc. (BJRI - Free Report) sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 93%, on average. Shares of BJRI have increased 51.1% in the past year.
The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates a rise of 5.5% and 311.8%, respectively, from the year-ago period’s levels.
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McDonald's (MCD) Outpaces Industry YTD: More Upside Left?
McDonald's Corporation (MCD - Free Report) is likely to benefit from robust comps growth, digital initiatives and solid-expansion efforts. Also, its focus on strategic efforts to attract customers in international markets bodes well.
Year to date, shares of McDonald's have gained 10.8% compared with the industry’s 8.8% growth. The price performance was backed by a solid earnings surprise history. McDonald's earnings surpassed the Zacks Consensus Estimate in five of the trailing six quarters. Earnings estimates for 2023 have moved up 0.2% in the past 30 days. This positive trend signifies bullish analysts’ sentiments, indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Let’s discuss the factors that highlight why investors should retain the stock for the time being.
Key Growth Drivers
The company continues to impress investors with robust comps growth. In first-quarter 2023, global comps increased 12.6% compared with a rise of 11.8% reported in the prior-year quarter. This marks the nineth consecutive quarter of comps growth. In the first quarter, comps in the United States, international operated markets and international developmental licensed segment rose 12.6% each, respectively. The company benefited from robust performance in Germany, the U.K., France, Australia and Canada. McDonald’s’ comps in the quarter benefited from a menu price increase, positive guest counts and marketing initiatives. This and the continued digital and delivery growth contributed to the upside.
The company's strategic efforts in the international markets continue to drive comps higher. It is constantly trying to improve its performance in the International Operated Markets, including Australia, Canada, France, Germany and the U.K. The company intends to drive comps growth in these markets through the introduction of value meals, customizing the menu to local customer tastes, reimaging of restaurants, efficient marketing and promotions, improved service and increased convenience via delivery and digitalized presence.
McDonald's continues to gain from robust digitalization. During the first quarter, the company reported accelerated digital engagement across the markets. It reported more frequent visits and incremental sales on the back of tailored loyalty messages, a strong lineup of mobile app offers and content offerings. During the first quarter of 2023, digital sales (from top six markets) rose 30% year over year to $7.5 billion. This contributed almost 40% to MCD’s system-wide sales. Given a rise in digital adoption, the company is optimistic and anticipates the initiatives to drive sales and average checks in the upcoming periods.
The company is focused on expanding its global footprint to drive growth. It believes that there is a huge opportunity to grow all its brands globally by expanding its presence in existing markets and entering new ones. Its expansion efforts continue to drive performance. It is planning to open more than 1,900 restaurants globally in 2023, including 400 openings in the United States and the IOM segment and 1,500 (including nearly 900 in China) inaugurations in the IDL market. The company expects net restaurant unit expansion to contribute nearly 1.5% to 2023 systemwide sales growth in constant currencies.
Zacks Rank & Other Key Picks
McDonald's currently sports a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the Zacks Retail and Wholesale sector are:
Dave & Buster's Entertainment, Inc. (PLAY - Free Report) sports a Zacks Rank #1 (Strong Buy). PLAY has a trailing four-quarter earnings surprise of 6.8%, on average. Shares of PLAY have gained 38.2% in the past year.
The Zacks Consensus Estimate for PLAY’s 2024 sales and EPS indicates a rise of 16.9% and 28%, respectively, from the year-ago period’s levels.
Abercrombie & Fitch Co. (ANF - Free Report) flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 480.6%, on average. Shares of ANF have increased 114.2% in the past year.
The Zacks Consensus Estimate for ANF’s 2024 sales and EPS indicates a rise of 3.4% and 732%, respectively, from the year-ago period’s levels.
BJ's Restaurants, Inc. (BJRI - Free Report) sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 93%, on average. Shares of BJRI have increased 51.1% in the past year.
The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates a rise of 5.5% and 311.8%, respectively, from the year-ago period’s levels.