McDonald's Same-Store Sales Appears To Be Improving In America, Data Shows

Credit Suisse’s Jason West maintained an Outperform rating on McDonald's Corporation MCD, while raising the price target from $130 to $135.

Same Store Sales Up

“Across our contacts, 1Q16 US SSS are running comfortably in the positive mid-single digit range, driven by successful value promos, continued contribution from all-day breakfast, and operational improvements,” West mentioned.

West believes that trends improved through the quarter, with February being better than January and March expected to be better than February.

Promotions Help

The analyst also mentioned that franchisee sentiment continues to be upbeat, “with generally positive commentary around the "McPick" platform, especially the 2 for $5 promo.”

Beyond the ongoing promotions, West believes that ops improvements have started bearing fruit, with franchisees reporting improvement in drive-thru times as well as order accuracy.

McDonald’s also intends to roll out a Monopoly promotion on March 29. “Monopoly was not run in 2015 and could be a further source of SSS uplift, along with digital menu boards rolling out this yr,” West added.

In addition, MCD Japan appears to be at an inflection point, with same store sales rising 32 percent in January/February. This could potentially drive 100 bps upside to the reported global same store sales.

Estimates Raised

The 1Q16 EPS estimate has been raised from $1.15 to $1.16 to reflect increased same store sales and improved FX. The 2016 EPS estimate has been raised from $5.37 to $5.45 to reflect the recent US dollar weakness and higher 1Q16 same store sales expectations.