Here’s Why We Have Updated Our Price Estimate For McDonald’s To $158
The momentum in McDonald’s (NYSE:MCD) sales continued in Q3 2017 and despite a sluggish industry environment the company reported a 6% increase in global comparable sales driven by an increase in guest count. This is the company’s second consecutive quarter of positive guest count and it has been able to successfully attract this increased traffic towards its premium, high margin products. McDonald’s future outlook looks positive as the company’s “velocity drivers” are delivering results. Focus on “gourmet” products which encourage customers to shift towards high margin products, value offerings, and personalized promotions using technology are driving sales. McDonald’s is on track to launch its mobile ordering system in 20,000 restaurants by the end of this year and its Experience of the Future stores are likely to drive traffic going forward.
Based on these positive factors we have updated our forecast for McDonald’s leading to a revision in its price estimate to $158. Below are some of the key forecasts for the company:
U.S. : We expect average revenue per company operated restaurant to increase by 10% in 2017 and at a slower but steady pace thereafter. For franchised restaurants we expect a 1% growth in revenues in 2017 followed by a steady 0.5% growth over our forecast period. We expect the company to grow its franchised restaurants in the U.S. at a rate of 0.5% over our forecast period.
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International Markets: We expect revenues from franchised restaurants to grow at 1% in 2017 and at a rate of 0.5% thereafter. We also expect McDonald’s to increase its franchised restaurants in the region over our forecast period.
High Growth Markets: We expect a faster pace of increase in franchised restaurants in this region – growing at around 8% in 2017 and then steadily in the range of 2-5% over our forecast period.
Foundational Markets and Corporate: This is another growth segment for McDonald’s and we expect a strong growth in franchised restaurants in this region.
Click here to see our detailed analysis for McDonald’s.
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