Fast-food chain McDonald’s (MCD) is focusing on more value deals in order to win back budget-conscious customers. Indeed, CEO Chris Kempczinski explained on the company’s earnings call that while promotions like the $2.99 Snack Wrap and $5 meal deals boosted sales last quarter, these are only the first steps. The company’s main goal is to make its “core menu” more affordable to attract low-income consumers who have cut back on visits due to higher prices.
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These value offers helped bring middle-income customers back, which reversed a previous drop in traffic. However, visits from low-income households fell by double digits and remain a big challenge for McDonald’s, as $10 combo meals still turn some customers away. As a result, Kempczinski stressed that improving how the menu board shows value will be key to winning these customers back and changing the overall perception of McDonald’s pricing.
Nevertheless, even with these challenges in the U.S., McDonald’s still beat Wall Street expectations for the quarter. In fact, comparable store sales worldwide rose by 3.8% year-over-year, which topped the 2.6% forecast from Visible Alpha. More specifically, U.S. comparable sales climbed 2.5%, slightly above estimates, while international markets delivered strong growth, helping the firm offset weaker U.S. traffic and maintain overall revenue momentum.
Is MCD Stock a Good Buy?
Overall, analysts have a Moderate Buy consensus rating on MCD stock based on 10 Buys, 10 Holds, and two Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average MCD price target of $339.78 per share implies 9.9% upside potential.
