On Friday, KeyBanc Capital Markets adjusted its outlook on McDonald’s Corporation (NYSE:MCD) shares, reducing the price target to $320 from the previous $330 while maintaining an Overweight rating. The adjustment follows a notable decline in the company’s stock value, which has fallen approximately 10% since late October 2024, lagging behind the S&P 500 by roughly 14%.
The underperformance of McDonald’s stock is attributed to a shift in investor sentiment away from global fast-food chains towards domestic full-service restaurants, which may have seen more earnings per share (EPS) upside as consumer confidence increased. Additionally, an E. coli outbreak in the fall has had a lingering impact on sales. Despite these challenges, InvestingPro data shows McDonald’s maintains strong fundamentals with a 56.6% gross profit margin and has raised its dividend for 49 consecutive years, demonstrating operational resilience.
KeyBanc’s proprietary data and industry discussions have led to a downward revision of McDonald’s U.S. same-store sales (SSS) growth estimate for the fourth quarter of 2024 from 0% to -1%. The first quarter of 2025 SSS growth forecast has also been reduced from 2% to 1.5%, primarily due to severe weather conditions. Consequently, KeyBanc has also revised its EPS estimates for 2024 and 2025 to $11.72 and $12.57, respectively, to account for the adjusted SSS projections and foreign exchange headwinds.
Despite the recent challenges and downward adjustments, KeyBanc remains optimistic about McDonald’s long-term prospects. The firm believes that McDonald’s has the potential to reinvigorate its marketing and innovation strategies to drive future market share gains. KeyBanc views the recent pullback in McDonald’s stock as an opportunity for investors to acquire shares of a leading industry player at a valuation that is now more attractive compared to its three-year average near 24 times the next twelve months’ projected earnings (NTM P/E). InvestingPro analysis indicates the stock is currently fairly valued, with a "GOOD" overall financial health score. Subscribers can access 10 additional ProTips and a comprehensive Pro Research Report covering McDonald’s complete financial picture.
In other recent news, McDonald’s Corporation, with its impressive last twelve-month revenues of $25.9 billion, has extended its technology partnership with Cognizant (NASDAQ:CTSH). This collaboration aims to streamline enterprise applications and advance McDonald’s cloud journey. Additionally, McDonald’s board member John J. Mulligan is set to retire at the 2025 Annual Shareholders’ Meeting, a development that doesn’t stem from disagreements with the company’s operations, policies, or practices.
In terms of financial analysis, Morgan Stanley (NYSE:MS) maintained its Overweight rating on McDonald’s shares, albeit with a slightly reduced price target of $336.00. Loop Capital also maintained its Buy rating on McDonald’s stock, despite a slight underperformance in same-store sales growth in the fourth quarter of 2024. BMO Capital Markets spotlighted McDonald’s as a top restaurant stock pick for 2025, due to its potential for strong sales growth and market outperformance.
McDonald’s continues to demonstrate operational excellence and resilience, as evidenced by the recent developments. These updates are based on analyst notes and the company’s recent announcements.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.