McDonald’s Corp., which reported better-than-expected third-quarter results before market open Monday, is well positioned for 2024, according to Wells Fargo.
“Catalysts are coming,” Wells Fargo analyst Zachary Fadem wrote in a note released mid-morning Monday, citing easing November compares ahead of McDonald’s
MCD,
December analyst event, as well as long-term restaurant growth.
“Despite a lukewarm response, we see a solid MCD setup into FY24,” Fadem added. “Rates & slowing comps are headwinds, but share gains are evident.”
Related: McDonald’s stock climbs after earnings and sales rise above expectations
Fadem noted that McDonald’s maintained quick service restaurant (QSR) traffic share with gains in beef and chicken. Additionally, the company’s service times improved by 9 seconds during the quarter. The analyst also pointed to McDonald’s growing number of restaurants, with 397 net new units in the third quarter implying “a big step up” to around 577 net adds in the fourth quarter.
Fadem also highlighted McDonald’s initiatives, such as its digital sales push and its Best Burger strategy, which is now in 70 markets with “encouraging early results.” Digital sales in McDonald’s top 6 markets were nearly $9 billion, up from nearly $7 billion in the same period last year, and from over $8 billion in the second quarter, Fadem noted. The analyst also explained that 90-day active loyal customers in McDonald’s top 6 markets rose to over 57 million, up from 52 million customers in the second quarter.
Set against this backdrop, Wells Fargo maintained its overweight rating for McDonald’s. Of 36 analysts surveyed by FactSet, 27 have an overweight or buy rating and nine have a hold rating for McDonald’s.
Related: McDonald’s CEO says earnings results prove that ‘difficult times’ for consumers can be a good thing
McDonald’s shares rose 2% Monday, outpacing the S&P 500 index’s
SPX
gain of 1.3%, boosted by the fast-food restaurant giant’s better-than-expected third-quarter earnings and sales.
Earlier this month, McDonald’s stock suffered its longest weekly losing streak in four years amid consumer-spending worries.
However, McDonald’s and rival Chipotle Mexican Grill Inc.
CMG,
are outperforming the broader dining sector, according to recent foot-traffic data from analytics company Placer.ai. Last week Chipotle kicked off restaurant earnings season with strong third-quarter results.
Related: McDonald’s and Chipotle set to continue dominance amid consumer-spending worries, research shows
McDonald’s shares have fallen 1% in 2023, compared with the S&P 500 index’s gain of 8.6%.
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