Will the good times last for McDonald's?

Posted Jan 19th 2007 4:33PM by Jonathan Berr
Filed under: Before the Bell, McDonald's (MCD), Wendy's Intl (WEN), Economic Data

McDonald's Corp. (NYSE:MCD) said last week that it had a great fourth quarter, but can the good times continue?

Analysts sure think so. They are expecting the home of the Golden Arches to report revenue of $5.6 billion, compared with $5.23 billion a year earlier, according to Thomson Financial. The average profit forecast still reads 58 cents, though the company said it earned 61 cents. I imagine this will be revised ahead of McDonald's earnings report on January 24.

Shares of McDonald's have jumped 27 percent over the past year, outperforming rivals, including Burger King Holdings Inc. (NYSE:BKC), up 20 percent, and Wendy's International Inc. (NYSE:WEN), which has dropped 42 percent. Jack in the Box Inc. (NYSE:JBX) has smoked them all, soaring more than 74 percent. The company has been buying back shares and posting better-than-expected results.

But in the eyes of Wall Street, Ronald McDonald reigns supreme. Eight Wall Street analysts consider McDonald's a buy, compared with four for Burger King, two for Wendy's, and one for Jack in the Box. Expectations for the stock, though, remain modest. The median target price is $47, compared with $44.75, where it's recently traded.

The company continues to have ambitious growth plans. It recently opened its first drive-thru in China and plans as many as 30 more over the next 12 to 18 months. Its new premium chicken sandwiches also seem to be selling well.

About the only potential monkey wrench for McDonald's is the growing consumer confidence. Will people still chow down under the Golden Arches if they are feeling less budget-conscious?

Also check out some other earnings reports that we're following, and let us know your thoughts on earnings expectations.

Tags: china, consumer spending, ConsumerSpending, earnings, fast food, FastFood, mcdonalds

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Reader Comments (Page 1 of 1)

1-19-2007 @ 11:54PM

George Bergey said...

Your stats for Wendy's are a little misleading --they don't take into account the spin-off of Tim Horton's last year. Both WEN and THI have done reasonably well of late.

1-20-2007 @ 11:50AM

Michael Schneider said...

Consumers are turning more to fast foods from other restaurants as the economy weakens. That's the trend. Most economists expect continued slowing of the economy.

1-20-2007 @ 11:50AM

Jens L�ffler said...

The main reason to by MCD for a long-time-strategy is the brand name; I always see young children crying for McDonalds-Burger especially in Europe. What analysts often forget is the fact, that most of the children are well-conditioned on fast-food
in their erliest childhood. A lot of them don’t know the tast of a steak. This development will get more and more relevance in bussy societies! So I think that Fast Food – especially MCD will be very
effective in Asia in future because it’s the „Western Way of Life“ – think on Coke during the fifties and sixties in Germany and it’s
still running!

1-22-2007 @ 10:31AM

mgmagri said...

Agreed, McDolnald's will continue to do well. Value never goes out of style. Also, their push into a new format to compete more directly with Starbucks should prove to be profitable.