McDonald’s (MCD), Gains from Innovation & Expansion
McDonald’s Corporation MCD has seen solid comps growth due to its focus on menu innovation and pricing strategies, loyalty programmes, increased digitalization, and strong operating performance.
The company has managed to navigate various macroeconomic challenges like COVID restrictions, global political constraints, Russia-Ukraine War along with inflationary costs pressures well. They have taken prudent steps to encourage growth in both the domestic and international markets. Its dedication to expansion and loyalty programs are admirable.
This Zacks #2 (Buy), stock has a long-term earnings increase rate of 8.2%. This highlights its inherent strength. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
MCD’s shares have risen 7.4% in the past year, outperforming the Zacks Retail-Restaurants industry’s growth of 6%.
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Over the past 30 days, analysts have raised their estimates and witnessed a rise in Zacks Consensus Estimate. In the past 30 days, the Zacks Consensus Expected Earnings Estimate for 2023 of $10.45 has increased from $10.44 to $10.45. The Zacks Consensus estimate for 2023 earnings is $10.45 per share. This implies 5.3% annual growth.
Driving Factors
The company’s initiative of innovating the menu and strategic pricing has increased guest count, resulting in increased sales in the United States. The company also launched Australiano coffee in Australia, expanding its coffee business. It received positive feedback during the second quarter of 2022. Also, the company’s initiative of implementing enhanced cooking procedures and rolling out new buns paved the path for solid customer feedback and incremental sales following their launch in Spain.
Global comps rose 9.5% in third quarter 2022. This was the seventh consecutive quarter in which comps have grown. Comps in the United States’ international operated markets (IOM), and international development licensed (IDL) segments rose 6.1%, 8.5%, and 16.7% respectively, during the third quarter. Comps in Latin America and Japan saw strong growth. Comps growth was reported by the company for the 28th consecutive quarter in Japan.
The company saw comparable sales rise due to its strong and efficient operations in international markets like Australia, France, Germany and France. It also saw comparable sales in Brazil, Japan and other countries.
The Oak Brook, IL-based top fast-food chain has seen strong digitalization help them increase their sales in international markets. Customers are now able to choose from a variety of options as the company works towards its Experience of the Future initiative. This is where technology will be integrated into its eateries.
Importantly, the company’s loyalty program has not only helped in retaining the existing customers but also in expanding the customer base. In more than 50 countries, the company has introduced a loyalty program, including in Australia, Germany, Canada and Canada.
MCD’s expansion efforts also continue to drive performance. The company continues to expand its global presence, despite the difficult situation. The company plans to open over 1,800 new restaurants worldwide in 2022. This includes 500 openings in America and the IOM segment, and 1,300 openings in China. The company projects a 3.5% growth in the number of restaurants by 2022.
Other key picks
Other top-ranked stocks within the Zacks Retail Wholesale sector include MercadoLibre, Inc. MELI, Casey’s General Stores, Inc. CASY Expedia Group, Inc. EXPE.
MercadoLibre is currently ranked #1 on Zacks. MELI’s stock has increased 47.7% in the past six-month period.
The Zacks Consensus Estimate for MELI’s 2023 sales and earnings per share (EPS) indicates growth of 19.7% and 80.7%, respectively.
Casey’s General Stores is currently ranked #1 on Zacks. CASY has a 4.2% surprise in its trailing quarterly earnings. In the last year, shares have risen 21.9%
The Zacks Consensus Estimate for CASY’s fiscal 2023 sales and earnings indicates a rise of 23.1% and 18.4%, respectively, from the year-ago period’s estimated levels.
Expedia has a Zacks #1 rank. EXPE has an annualized 14% earnings growth rate. In the past three months, the stock has increased 10.8%.
The Zacks Consensus Estimate for EXPE’s 2023 sales and EPS indicates growth of 9.4% and 20.3%, respectively, from the year-ago period’s expected levels.
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McDonald’s Corporation (MCD) : Free Stock Analysis Report
Expedia Group, Inc. (EXPE) : Free Stock Analysis Report
Casey’s General Stores, Inc. (CASY) : Free Stock Analysis Report
MercadoLibre, Inc. (MELI) : Free Stock Analysis Report