RBC's Got No Beef With McDonald's, Says Buy The Pullback

David Palmer of RBC Capital Markets said the recent pullback in McDonald's Corporation (NYSE: MCD) shares offer a good entry point for investors seeking growth and income.

Pointing to the 3 percent dividend yield of McDonald, Palmer said, "We believe the key catalysts for the stock will be accelerating two-year stacked SSS growth in 4Q and increasing evidence that McDonald's is planting the seeds of a sustained turnaround."

For 2016, Palmer noted that McDonald's U.S. two-year SSS growth has slowed from about 3 percent in the first quarter to about 0 percent in the second quarter.

That said, the analyst expects improvement in the fourth quarter, despite his new third quarter SSS estimate of 1 percent, which implies about a 4 percent two-year stacked SSS drop.

Palmer, who has an Outperform rating on McDonald's shares, projects a two-year stacked SSS of about 7 percent in the fourth quarter (and one year SSS of 1 percent) as All-Day Breakfast 2.0 is introduced.

"Furthermore, we would not be surprised to see improved value message and a US digital tie-in with Pokemon by year-end," Palmer noted.

Last week, McDonald's Japan partnered with Niantic and The Pokemon Company for Pokémon GO, under which 3,000 McDonald's restaurants will serve as designated PokéStops, with 400+ of these restaurants serving as PokéGyms.

At time of writing, shares of McDonald's were down 0.28 percent to $117.68.

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