RBC Previews McDonald's Q4 And Looks Forward To 2019

McDonald's Corp (NYSE: MCD) is scheduled to report its fourth quarter results Jan. 30 and certain key metrics are likely to come in ahead of expectations due to an acceleration in the U.S. business, according to RBC.

The Analyst

RBC Capital Markets' David Palmer maintains an Outperform rating on McDonald's stock with an unchanged $205 price target.

The Thesis

McDonald's is expected to show a 3 percent same-store sales growth in its U.S. business, which Palmer said is higher than the Street's estimate of 2.3 percent. The beat is likely due to four unique trends, including:

• Overall industry-wide growth due to favorable weather and a strong December;
• Compelling menu deals like the $5 mix & match and $6 meal deal;
• A focus on breakfast items like the Triple Stack sandwich;
• A boost from re-imaging initiatives.

McDonald's momentum in the fourth quarter likely carried over to 2019, which prompted the analyst to lift his same-store sales first quarter estimate from 3.5 percent to 4 percent. Beyond the first quarter the restaurant chain could see upside from improving its digital platform and relationship with consumer, which is "extremely important" to the business. Palmer said a proper focus and execution on digital could result in McDonald's boasting a better digital platform than Starbucks Corporation (NASDAQ: SBUX).

Price Action

Shares of McDonald's traded at $187 early Thursday morning.

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