McDonald's accelerating momentum and menu innovation have created a 'catalyst path' to improving US comparable sales into 2025, though international pressures remain. The brokerage UBS Securities has raised its price target on the stock to $345 from $305, reiterating a buy rating. UBS is now projecting flat same-store sales in the third quarter, compared with a prior estimate for a 1% drop.
The consensus is anticipating a slight decrease of 0.2%. For the fourth quarter, UBS has increased its growth target to 1.5% from 0.5%, surpassing the 1.1% Street view. Analyst Dennis Geiger noted that while macroeconomic headwinds and sales pressures continue to affect category growth, McDonald's has the necessary strategies in place to capture market share gains.
Easing comparisons and the launch of collector's edition cups in August, which provided a sales boost, likely contributed to the improvement in same-store sales during the third quarter. UBS's model anticipates fourth-quarter trends to accelerate, bolstered by the ongoing $5 meal deal that enhances customer traffic, alongside the introduction of the Chicken Big Mac in the US this month.
Furthermore, an expected permanent national value platform in the first quarter of 2025 is projected to drive improved traffic trends, coupled with new menu items such as the anticipated return of the McRib this year. However, McDonald's international market is likely to face challenges due to macroeconomic pressures, which presents some downside risk to third-quarter consensus estimates for same-store sales.
Geiger expressed concerns about the potential for modest downside risk to sell-side consensus earnings projections into 2025, as many investors are already positioned somewhat below the consensus EPS forecast of $12.74 for next year..