On Tuesday, Morgan Stanley (NYSE:MS) adjusted its outlook on McDonald’s Corporation (NYSE:MCD) shares, increasing the price target modestly from $336 to $340, while maintaining an Overweight rating on the stock. Currently trading at $308.42 with a market capitalization of $221 billion, McDonald’s shares are near their 52-week high of $317.90. According to InvestingPro analysis, the stock appears overvalued at current levels, with technical indicators suggesting overbought conditions. The revision reflects the firm’s analysis of McDonald’s recent performance and future prospects in a challenging quick-service restaurant (QSR) environment, particularly among burger chains.
The firm acknowledged that McDonald’s fourth-quarter results faced challenges, with earnings per share (EPS) and revenue falling short, primarily due to company-owned stores’ performance. Trading at a P/E ratio of 25.84 and showing modest revenue growth of 3.7%, the company maintains strong profitability metrics. InvestingPro data reveals 15 analysts have revised their earnings downward for the upcoming period. However, comparable sales were stronger, especially outside the United States, and were in line with investor expectations domestically. Despite the subdued earnings growth, Morgan Stanley does not anticipate the more pessimistic scenarios for 2025 that some have suggested.
Analysts from the firm believe that McDonald’s is relatively well-positioned to navigate the current industry headwinds and is not without options to improve upon the sluggish performance experienced in 2024. Investor sentiment towards McDonald’s has shifted positively in recent months, buoyed by signs of progress in various markets and the potential for operational levers to maintain the firm’s prior expectations for top-line growth and operating profit.
McDonald’s efforts to attract customers through value offerings have shown to increase traffic, albeit at the expense of average check size. The company’s focus will be on mitigating this impact as part of its strategy for 2025. Furthermore, McDonald’s appears to be in control of its destiny, with action plans in major markets and development targets being met, even though this approach has slightly affected free cash flow (FCF), aligning with projections from December 2023.
In conclusion, while Morgan Stanley has slightly tempered its EPS estimates due to below-the-line items, the firm’s overall stance on McDonald’s remains Overweight, with the price target adjusted to $340. For deeper insights into McDonald’s financial health and valuation metrics, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 US stocks with detailed analysis and actionable intelligence.
In other recent news, McDonald’s Corporation has been in the spotlight following its recent earnings report. The company’s sales growth in several international markets, including the Middle East, Japan, and parts of Europe, was a highlight, despite a weaker performance in the U.S. market. BTIG analysts maintained a Neutral rating on the fast-food giant’s stock, citing the company’s challenge to transition lower-income customers from promotional discounts to regular-priced menu items.
KeyBanc Capital Markets adjusted its outlook on McDonald’s shares, increasing the price target from $320.00 to $335.00 while maintaining an Overweight recommendation. The firm noted stronger-than-expected international same-store sales growth, offset by declining sales and margin contraction in the U.S. market. KeyBanc has adjusted McDonald’s earnings per share (EPS) for 2025, reducing the forecast to $12.39, accounting for foreign exchange impacts and marginally lower margins for company-operated restaurants.
Bernstein analysts raised their price target on McDonald’s shares from $290.00 to $300.00, maintaining a Market Perform rating. The adjustment followed McDonald’s fourth-quarter 2024 performance, which surpassed expectations with a slight increase in global same-store sales. Bernstein analysts, however, do not anticipate a significant enhancement in McDonald’s Operating Margins due to various factors, including an average check that lags behind guest count growth, potential impacts of tariffs, and ongoing macroeconomic pressures in certain international markets.
BMO Capital Markets increased its price target on McDonald’s shares from $335.00 to $340.00, reiterating an Outperform rating. Despite mixed results, McDonald’s highlighted a sequential acceleration in U.S. comparable sales for January. BMO Capital’s analyst expressed confidence in the company’s potential for long-term growth.
Lastly, JPMorgan reaffirmed its confidence in McDonald’s, raising the price target to $300 from $280 while keeping an Overweight rating. The firm’s analyst attributed the strong performance of McDonald’s to the company’s resilience during a challenging period marked by aggressive competition in the United States and a difficult European market.
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