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McDonald's Corp MCD

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McDonald's U.S. Sales, Chicken Sandwiches, and Digital Meet Expectations; Shares Look Fairly Valued

Sean Dunlop Equity Analyst

Analyst Note

| Sean Dunlop |

After digesting wide-moat McDonald's first-quarter results, we maintain our fair value estimate of $231 and view the shares as fairly valued. A slightly quicker recovery than anticipated in the U.S. (with comparable-store sales up 13%) led us to modestly increase our EPS estimate (up $0.02 to $8.29), offset by higher stock-based compensation. After stripping out the impact of a gain on the sale of some of the firm's Japanese units, McDonald's EPS came in $0.11 higher than FactSet consensus, with a reported $1.92 representing 30% growth from a year ago. The firm's U.S. market, boosted by stimulus spending and February's chicken sandwich launch, healthily exceeded 2019 levels on a two-year stacked basis (up 13.1%), though the international operated markets division continued to see pressure. A heavy skew toward Western Europe capped same-store sales growth at 0.6% for the segment, down a third from 2019 as virus outbreaks and dine-in restrictions impeded guest traffic. 

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Company Profile

Business Description

McDonald’s Corporation is the largest restaurant owner-operator in the world, with 2020 systemwide sales of $93 billion across 39,000 stores and 119 countries. McDonald’s revolutionized the restaurant industry with a cheap and fast core menu, building its impressive footprint through partnerships with independent restaurant franchisees. The firm earns 57% of its revenue from franchise royalty fees and lease payments, with the remainder coming from company-operated stores across its three core segments: the United States, internationally operated markets, and international developmental/licensed. McDonald’s owns 55% of the real estate and 80% of the buildings in its franchise system, offering it substantial leverage in maintaining quality standards and consistency across markets.

110 North Carpenter Street
Chicago, IL, 60607
T +1 630 623-3000
Sector Consumer Cyclical
Industry Restaurants
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 200,000