Too Much ‘Boom and Splat' but McDonald's Can Serve Up Sales Lift in Q2

Business Insider

a day ago

Shares in fast food giant McDonald's (MCD) were less tasty today despite analysts suggesting it was on track to meet Q2 sales expectations with a little help from Minecraft.
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Promotional Success
Five-star TipRanks-rated analyst Andrew Charles of TD Cowen said the group was on track to hit same-store sales of 2.8%, boosted by its collaboration with the film A Minecraft Movie in April. This included a Minecraft Movie meal with collectibles.
However, despite the success of the promotion, Charles, who talked to a number of industry experts about the iconic fast-food brand, said it showed how McDonald's was the victim of a boom/splat mentality.
This means that the business continues to see 'short-term spurts in reaction to promotions before trends quickly return to softer, pre-promotion levels.'
Indeed, in its Q1 earnings in early May it saw revenue decline 3% year-over-year to $5.96 billion. More importantly, global comparable sales were down 1%, with U.S. sales dropping 3.6% due to fewer customers
Nice Pie
Instead, the experts Charles spoke to said the company had to return to a more durable sales growth pattern. This includes innovating at lower prices rather than discounting core items; implementing a more frequent cadence of menu innovation; and relaunching successful past menu items such as Fried Apple Pies.
The experts were more bullish on a second-half sales improvement this year, fueled by the addition of McCrispy Strips to its menu.
Despite this, Charles expects its shares to remain range-bound between $305-$320 until more durable sales growth is evident.
He has a price target of $305 on the stock and a Hold rating.
Is MCD a Good Stock to Buy Now?
On TipRanks, MCD has a Moderate Buy consensus based on 14 Buy and 10 Hold ratings. Its highest price target is $364.