On Tuesday, Loop Capital Markets adjusted its outlook on McDonald’s Corporation (NYSE:MCD), increasing the fast-food giant’s price target slightly from $342 to $346, while reaffirming a Buy rating on the shares. The adjustment comes after McDonald’s reported its fourth-quarter earnings, which presented a mixed financial picture but included positive remarks about recovery from recent challenges. Currently trading at $308.42, McDonald’s maintains a solid market capitalization of $221 billion and boasts a "GOOD" financial health score according to InvestingPro analysis.
McDonald’s fourth-quarter earnings per share (EPS) of $2.83 fell short of Loop Capital’s projection of $3.04 and the consensus estimate of $2.85. In the United States, the company saw same-store sales decline by 1.4%, which was a bit worse than both Loop Capital’s expectation of a 0.5% decrease and the consensus of a 0.6% drop. This performance was also slightly below the flat to 0.5% decline range that was identified in Loop Capital’s most recent franchisee checks, dated January 3, 2025. InvestingPro data reveals that 15 analysts have recently revised their earnings expectations downward for the upcoming period.
Despite the lower-than-anticipated domestic comparable sales, McDonald’s conveyed optimism about moving past the E. coli outbreak that affected its operations in October. The company anticipates a full recovery from the incident by the beginning of the second quarter of 2025. This timeline aligns with the feedback from the majority of franchisees Loop Capital had contacted.
The raised price target to $346 is based on a valuation of approximately 19 times the estimated enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization) for the year 2025. Loop Capital’s analyst highlighted the belief that the negative impact of the E. coli outbreak is largely resolved, which supports the firm’s decision to maintain a positive outlook on McDonald’s stock.
In other recent news, McDonald’s Corporation’s fourth-quarter earnings and revenue results have been a key focus for various analysts. Morgan Stanley (NYSE:MS) has increased its price target for the company to $340, despite challenges in the fourth quarter that saw earnings per share (EPS) and revenue fall short. Analysts at the firm are optimistic about the company’s future prospects in the quick-service restaurant environment.
In contrast, BTIG maintains a neutral rating on McDonald’s, acknowledging the company’s strong sales growth in several international markets. The firm anticipates that the company’s strategy of transitioning customers from promotional discounts to regular-priced menu items will significantly impact future earnings.
KeyBanc Capital Markets has also adjusted its outlook on McDonald’s, raising the price target to $335. The firm cites stronger-than-expected international same-store sales growth as a key driver for this adjustment, despite a slight reduction in the EPS forecast for 2025.
Bernstein analysts have taken a similar stance, raising their price target to $300 based on a slight increase in global same-store sales. However, they caution that they do not anticipate significant enhancements in McDonald’s operating margins.
Lastly, BMO Capital Markets has increased its price target on McDonald’s shares to $340, expressing confidence in the company’s potential for long-term growth, despite a slight shortfall in EPS in the recent earnings report. These developments indicate a generally positive outlook for McDonald’s, with a focus on international sales growth and strategic initiatives.
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