Even with a strong run to start 2017, Bank of America Merrill Lynch still views McDonald's Corporation MCD as one of its top picks.
Justification For Analyst's View
1. Moving Forward: The company is shifting towards a more aggressive direction in 2018 and is focusing on creating a value menu with even lower prices. Band of America Merrill Lynch views this as a favorable move.
2. The Economics: McDonald’s franchises are currently attaining very strong economics as “the average MCD unit runs at about 19 percent fully capitalized post-royalty pre-maintenance cash on cash returns vs peers at about 11–13 percent.” Additionally, the report sees McDonald’s being able to take a much more aggressive approach due to higher margins.
3. The Valuation: McDonald’s currently seems relatively cheap, according to the report.
Related Links: McDonald's Is In A 'Sweet Spot' To Hit 2019 Targets; BMO Initiates At Outperform Restaurant Analyst: McDonald's U.S. Turnaround Is Happening
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