January 8, 2022

Here’s why investors should hold McDonald’s (MCD) shares now

This story originally appeared on Zacks

McDonald’s Company MCD benefits from robust digitization, growth in comps, a loyalty program, menu innovations and expansion efforts. As a result, the company’s shares have gained 7.8% in the past six months, compared to an industry decline of 0.9%. However, dismal traffic and poor performance from China hampered the performance of the company. Let’s dig deeper.

– Zack

Growth drivers

The company continues to benefit from robust digitization. During the coronavirus pandemic, the company focused on drive-thru, delivery and take-out. Before the coronavirus crisis, drive-thru represented about two-thirds of all sales in the United States. Despite the reopening of dining rooms, the company said drive-thru sales in its six major markets remain strong from pre-pandemic levels.
The company said more than 80% of its restaurants in 100 markets around the world provide delivery. In the United States, 95% of its restaurants offer drive-through services. Over the past year, the delivery sales mix has doubled in Australia, Canada and the United States. It announced that in its six major markets, digital sales topped $ 10 billion, or nearly 20% of system-wide sales in 2020. Since the start of the year, the company has recorded around 13 billion. billion dollars in digital sales in its six major markets.
Recently, McDonald’s launched its very first loyalty program in the United States. The new loyalty program will not only help retain existing customers, but also expand the customer base. The loyalty program is likely to generate average sales and checks. During the third quarter 2021 conference call, the company announced that the launch of its loyalty program in the United States had exceeded expectations. In just a few months, the company has over one million registered members and over 15 million active loyalty members are earning rewards. The company expects the number to increase in the coming days. McDonald’s currently has loyalty programs in France, the United States and Germany. MyMcDonald’s Rewards is expected to launch in Canada by the end of 2021, and in the UK and Australia during the first half of 2022. By mid-2022, the company plans to have a loyalty program in the six main markets.
McDonald’s believes there is a huge opportunity to grow all of its brands globally by expanding its presence in existing markets and entering new ones. Company expansion efforts continue to drive performance. Despite the pandemic, the company has opened approximately 500 restaurants in the market in 2020. It plans to open more than 1,500 restaurants worldwide in 2021. In China, the company exceeded the 4,000 restaurant mark in June and is in the process of opening 650 new restaurants. in the country this year. In China, the company has already opened 500 new restaurants.
Zacks Rank # 3 (Hold) continues to impress investors with robust lineup growth. In the third quarter of 2021, global compositions rose 12.7% compared to a decline of 2.2% in the previous year quarter. This is the third consecutive quarter of growth in comps after reporting a decline in the previous four quarters. In the third quarter, compositions in the United States, internationally operated markets and the international development licensing segment increased 9.6%, 13.9% and 16.7%, respectively. Japan and Latin America posted solid growth in lineup.

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Concerns

McDonald’s results over the next few quarters should reflect the impacts of the coronavirus pandemic. Although the company has reopened most of its restaurants, it could experience dismal traffic due to issues with the Omicron variant. The company continues to monitor the resurgence of coronavirus cases around the world. Although the company has reopened about 80% of its dining rooms in the United States, nearly 3,000 dining rooms remain closed in areas at high risk for COVID.
Although overall compositions have increased sharply, they remain below the pre-pandemic level in a few markets. In the third quarter of 2021, comps in the Chinese market were negative. The slowing economy and the resurgence of COVID-19 have negatively impacted lineup in China.

Choice of key restaurants

Papa John’s International, Inc. PZZA currently wears a Zacks Rank # 2 (Buy). The company benefited from its off-site business model. The off-site sales of the business model have exceeded pre-pandemic levels. We believe that an increase in the number of customers combined with targeted offsite marketing is likely to boost the performance of the channel in the periods to come.
Papa John’s has reported better-than-expected earnings in three of the past four quarters, with an average surprise of 27.2%. The company’s profits for fiscal 2021 are expected to grow 138.6%. PZZA stock has gained 48.2% over the past year. You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.
Restaurants Del Taco, Inc. TACO has a Zacks # 2 rank. The company has a surprise earnings for the last four quarters of 25.7%, on average. The company’s shares have gained 3.3% in the past three months.
Zacks’ consensus estimate for sales and earnings per share of Del Taco Restaurants for the current year suggests an improvement of 7.2% and 33.3%, respectively, over the time of year former.
Kura Sushi USA, Inc. KRUS wears a Zacks Rank # 2. The company has a surprise earnings for the last four quarters of 15.6%, on average. The company’s shares have climbed 225.1% in the past year.
Zacks’ consensus estimate for Kura Sushi’s current year sales and EPS suggest growth of 108% and 85.7%, respectively, from a year ago levels.

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McDonald’s Corporation (MCD): Free Inventory Analysis Report

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