Market Overview

Guggenheim Says McDonald's Is Setting Up Well For 2019, Upgrades Stock To Buy

Guggenheim Says McDonald's Is Setting Up Well For 2019, Upgrades Stock To Buy

Investors should consider being buyers of fast food giant McDonald's Corp (NYSE: MCD) given a combination of attractive valuation and expectations for strong momentum in 2019, according to Guggenheim.

The Analyst

Guggenheim's Matthew DiFrisco upgraded McDonald's from Neutral to Buy with a new $200 price target.

The Thesis

Shares of McDonald's are trading near 15.6 times Guggenheim's EV/2018 EBITDA estimate, which is a 33-percent discount to Domino's Pizza, Inc. (NYSE: DPZ) and a 21-percent discount to Yum! Brands, Inc. (NYSE: YUM), DiFrisco said in the note.

This "unjustifiable" valuation gap to its peers has existed for the past five years at a time when it was a lower franchise mixed company,. McDonald's is on track to hit its long-term 95 percent franchise mix target, which would be in line with both Domino's and Yum Brands.

Meanwhile, McDonald's management continues to deploy its "Experience of the Future" (EOTF) technological overhaul, which the analyst said is found at around one-third of stores globally.

As part of the modernization effort, the company should see continued incremental customer visits and higher average checks. Assuming a full EOTF implementation in the future, global sales lifts should be in the mid-single digit range and U.S. same-store sales should become a net tailwind in the first half of 2019.

Price Action

Shares of McDonald's traded around $170.87 at time of publication.

Related Links:

Who To Choose In Fast Food? KeyBanc Sizes Them Up

Why Goldman Sachs Is Adding AutoZone, McDonald's To Its Conviction List

Latest Ratings for MCD

Jan 2021Goldman SachsInitiates Coverage OnBuy
Jan 2021OppenheimerUpgradesPerformOutperform
Jan 2021Stephens & Co.MaintainsEqual-Weight

View More Analyst Ratings for MCD
View the Latest Analyst Ratings


Related Articles (MCD)

View Comments and Join the Discussion!

Posted-In: Fast Food Guggenheim PartnersAnalyst Color Upgrades Price Target Restaurants Analyst Ratings General Best of Benzinga

Latest Ratings

URIVertical ResearchInitiates Coverage On310.0
PCARVertical ResearchInitiates Coverage On95.0
DEVertical ResearchInitiates Coverage On345.0
CNHIVertical ResearchInitiates Coverage On16.0
AGCOVertical ResearchInitiates Coverage On119.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at