On Tuesday, BMO Capital Markets adjusted its outlook on McDonald's Corporation (NYSE: NYSE:MCD), reducing the price target to $315 from the previous $330, while retaining an Outperform rating on the stock.
The adjustment follows McDonald's reported second-quarter earnings per share (EPS) of $2.97, which fell short of the consensus estimate by $0.10. This shortfall was attributed to weaker-than-expected comparable sales across various segments of the business.
The noted pressures on McDonald's performance persisted into July, but the introduction of a $5 meal deal has been successful in driving customer participation. The company is also planning to introduce additional value programs in the near future. As a result of these factors, BMO Capital has revised its estimates downward and set a lower price target for McDonald's shares.
Despite the reduction in the price target, BMO Capital believes that McDonald's remains well-positioned to appeal to the value-oriented consumer market. The firm anticipates the potential for a sales inflection point, given the easier year-over-year comparisons ahead, as well as relative earnings visibility.
McDonald's Q2 results showed a slight dip in U.S. comparable sales. Based on the results, Wells Fargo and JPMorgan have revised their price targets for McDonald's shares. Wells Fargo reduced its price target to $285 from $300, while JPMorgan cut it from $290 to $270. Despite these adjustments, both firms maintained an Overweight rating on the company's shares.
McDonald's also reported its first global sales decline in over three years, attributing this to China's economic weakness. In response, the company has emphasized strategic moves to counter these challenges, focusing on value, operational improvements, and digital growth. McDonald's is aiming to expand its global presence to 50,000 restaurants by the end of 2027.
InvestingPro Insights
Following BMO Capital Markets' recent outlook adjustment on McDonald's Corporation (NYSE:MCD), InvestingPro data provides additional context for investors considering the fast-food giant's stock. McDonald's currently boasts a robust market capitalization of $188.4B, indicating its significant presence in the market. Despite a challenging quarter, the company has demonstrated consistent revenue growth over the last twelve months, with a 6.46% increase, showcasing its ability to expand earnings amidst economic pressures.
InvestingPro Tips highlight McDonald's impressive track record of raising its dividend, now for 49 consecutive years, which may appeal to income-focused investors. Moreover, while some analysts have revised their earnings downwards for the upcoming period, the company's low price volatility and position as a prominent player in the Hotels, Restaurants & Leisure industry suggest a level of stability and resilience. It's worth noting that McDonald's is trading at a high P/E ratio relative to near-term earnings growth, which could be a consideration for value investors.
For those investors looking to delve deeper into McDonald's financials and future prospects, InvestingPro offers additional tips to help inform your investment decisions. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and access the full suite of insights and analytics, including 10 more InvestingPro Tips for McDonald's Corporation.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.