Market Overview

'Positive Implications': Why McDonald's Canada's Performance Is Important For The US Business

'Positive Implications': Why McDonald's Canada's Performance Is Important For The US Business
Related MCD
Benzinga's Bulls & Bears Of The Week: Delta Air, McDonald's, Netflix, Nokia, Tesla And More
Goldman On Restaurants: Buy Texas Roadhouse, Sell Yum, Hold Starbucks
McDonald's loses 'Big Mac' trademark in EU (Seeking Alpha)

McDonald's Corp (NYSE: MCD) hosted several Street analysts in Toronto to showcase the performance of the Canadian unit and its potential impacts on the U.S. business.

The Analysts

BMO Capital Markets' Andrew Strelzik maintains an Outperform rating on McDonald's with an unchanged $195 price target.

Barclays' Jeffrey Bernstein maintains at Overweight, unchanged $190 price target.

Wells Fargo's Jon Tower maintains at Outperform, unchanged $202 price target.

BMO: Similar Markets

McDonald's Canadian business has been performing particularly well over the past five to six years judging by multiple key metrics, BMO's Strelzik said in a note.

They include:

  • Annual comp growth of 4.8 percent.
  • A 65-percent increase in franchisee per store cash flow to $500,000.
  • Success in delivery, with some units delivering 100 orders per day — of which 70 to 80 percent are incremental transactions.
  • Kiosks account for 46 percent of transactions and come with a 20-percent larger average check size.
  • Sustainable sales growth after the completion of store modernizations.

The Canadian market is no different from the American market, and McDonald's American management team is introducing initiative similar to those undertaken in Canada, the analyst said.

As such, McDonald's Canada's success over the past few years has "positive implications" for the U.S. outlook, Strelzik said.

Barclays: Expect Years Of Outsized Growth In The US

McDonald's Canada is included in the company's international lead market segment, so any Canada-specific financial and performance metrics are hard to find, Barclays' Bernstein said in a note. The restaurant chain's management team made it clear a brand transformation is succeeding, as shown by 12 years of comp growth and a peak quick service restaurant market share of more than 17 percent, he said.

Canada is at the "forefront of the McDonald's system," and the company's encouraging comments suggest a similar impact is possible in the U.S. market, the analyst said.

The U.S. business could see years of outsized comp growth if Canada's performance over the past decade is any indication of future domestic results, according to Barclays.

Wells Fargo: US News Stole The Spotlight

In conjunction with the investor meeting in Toronto, news from the U.S. business took the spotlight, Wells Fargo's Tower said in a note.

They are:

  • McDonald's is expanding a deadline for franchisees to include its "Experience of the Future" remodel through 2022 versus 2020.
  • Capex and same-store sales headwinds in 2019 will likely be lower than previously expected, as management is taking a "more level-loaded remodel schedule."
  • McDonald's will be working with its franchisees to better address local versus national value advertising.

Price Action

McDonald's shares were trading up by 1.5 percent at $187.41 at the time of publication Wednesday.

Related Links:

Early Reactions To McDonald's Q3 Earnings Beat

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

Photo courtesy of McDonald's.

Latest Ratings for MCD

Jan 2019Wells FargoMaintainsOutperformOutperform
Nov 2018Morgan StanleyUpgradesEqual-WeightOverweight
Oct 2018CitigroupMaintainsNeutralNeutral

View More Analyst Ratings for MCD
View the Latest Analyst Ratings

Posted-In: Andrew StrelzikAnalyst Color Price Target Reiteration Restaurants Top Stories Analyst Ratings General Best of Benzinga


Related Articles (MCD)

View Comments and Join the Discussion!

Latest Ratings

View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Analyst: Headset Maker Turtle Beach Continues To Benefit From 'Fortnite,' Battle Royale Gaming

Mid-Afternoon Market Update: Dow Rises Over 500 Points; Tiffany Shares Plunge