Analyst Note| R.J. Hottovy, CFA |
We believe investors should focus on three topics coming out of wide-moat McDonald's better-than-expected third-quarter sales update. First, U.S. comps of 4.6% (versus Consensus Metrix market expectations of 2.7%) were the clear highlight and reaffirm that strategies put in place to navigate coronavirus-related disruptions have long-term potential. Notably, McDonald's Travis Scott celebrity meal promotion helped to jump-start comps in September (double-digit growth, including positive comps across all dayparts including breakfast), and we believe much of this momentum will persist into the fourth quarter with the recently announced J Balvin meal. While promotions deserve credit for the top-line outperformance, we believe menu innovations like Spicy McNuggets as well as digital ordering and drive-thru enhancements have been solid contributors to recent performance, helping to drive average order size and dinner daypart strength.