Shares in fast-food chain McDonald’s (MCD) beefed up around 4% in pre-market trading today as customers seeking out its value meals in the cost-of-living crisis helped Q1 sales and earnings beat forecasts.
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Sales Rise in the U.S.
The company said that despite a ‘challenging economic backdrop’ it posted a rise in U.S. same-store sales for the fourth quarter in a row. The 3.9% sales rise was in line with Wall Street expectations.
It also reported a 3.8% increase in global same-store sales with the U.K., Germany and Australia all performing well.
Adjusted earnings per share of $2.83 beat Wall Street’s forecasts for $2.75. Revenue grew 9% year over year to $6.52 billion, slightly above forecasts of $6.46 billion.
“McDonald’s delivered this quarter proving that we can drive results even in a challenging environment,” Chairman and CEO Chris Kempczinski said. “Our value leadership, breakthrough marketing, and menu innovation continue to serve up what customers want.”
This included the Big Arch, a limited-time supersized burger that launched in the U.S. in early March. In addition, in early April, McDonald’s launched a new under $3 menu and a $4 breakfast meal deal, in addition to its ongoing $5 to $6 meal deals. The new $3 menu replaced McDonald’s buy-one, get-one promotion.
Franchisees are Positive
The company also, in late April, released six new specialty drinks, including refreshers and dirty sodas. BTIG analyst Peter Saleh believes the drinks could drive a mid-single-digit sales lift in the current quarter.
“Franchisees are overwhelmingly positive on the platform,” Saleh said. “Our conversations suggest that the beverage platform will at the very least drive incremental check, and could meaningfully increase food attachment.”
MCD stock is down nearly 7% in the year-to-date amid concerns about sales pressure, high costs, and the impact of geopolitical risks on business. According to TipRanks’ Options Tool, options traders expected a move of about 3.5% in either direction after the Q1 earnings report.
Is MCD a Good Stock to Buy Now?
On TipRanks, MCD has a Moderate Buy consensus based on 14 Buy and 12 Hold ratings. Its highest price target is $385. MCD stock’s consensus price target is $347.13, implying a 22.19% upside.
