McDonald’s Reports 3Q Global Comps Beat; Analyst Boosts PT

McDonald’s reported sequential improvement in global comparable sales or comps in 3Q, reflecting positive momentum in the U.S. The fast-food giant’s global comps fell 2.2% in 3Q, in comparison to a decline of about 24% in 2Q. 3Q global comps decline was narrower than the analysts’ expectations of a decline of 5%.

McDonald’s (MCD) reported positive U.S. comps of 4.6%, better than analysts’ expectations of 2.5% growth. The growth was driven by “strong average check growth from larger group orders as well as strong performance at the dinner daypart,” the company said in a statement on Thursday.

However, comps at International Operated Markets fell 4.4% in 3Q, due to a decline in France, Spain, Germany and the UK, offset by positive comps in Australia. Comps of internationally licensed markets also dropped 10.1%, as sales lagged in Latin America and China partly offset by positive sales in Japan.

The company also announced a quarterly cash dividend hike of 3% to $1.29 per share, which will be payable on Dec. 15 to shareholders of record on Dec. 1. The new dividend implies a dividend yield of 2.28% based on the closing price of Oct. 8. (See MCD stock analysis on TipRanks).

Following the announcement, Truist Securities analyst Jake Bartlett raised the price target on McDonald’s stock to $246 (about 9% upside potential) from $212 with a reiterated Buy rating.

The analyst believes that the company’s 3Q comps beat suggests that “it is well positioned in the current environment and LT [long-term] to gain market share.” Bartlett also said that though the dividend increase was lower in comparison to last years’ dividend hike, “it reflects management’s confidence in the business, despite severe macro uncertainty.”

Currently, the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 17 Buys and 5 Holds. The average price target of $226.82 implies that the shares are fully priced at current levels. Shares were up by 14.3% year-to-date, and dropped 0.3% in Thursday’s day trading before climbing 0.75% after-hours.

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