Too Much ‘Boom and Splat’ but McDonald’s Can Serve Up Sales Lift in Q2

Shares in fast food giant McDonald’s (MCD) were less tasty today despite analysts suggesting it was on track to meet Q2 sales expectations with a little help from Minecraft.

Promotional Success

Five-star TipRanks-rated analyst Andrew Charles of TD Cowen said the group was on track to hit same-store sales of 2.8%, boosted by its collaboration with the film A Minecraft Movie in April. This included a Minecraft Movie meal with collectibles.

However, despite the success of the promotion, Charles, who talked to a number of industry experts about the iconic fast-food brand, said it showed how McDonald’s was the victim of a boom/splat mentality.

This means that the business continues to see “short-term spurts in reaction to promotions before trends quickly return to softer, pre-promotion levels.”

Indeed, in its Q1 earnings in early May it saw revenue decline 3% year-over-year to $5.96 billion. More importantly, global comparable sales were down 1%, with U.S. sales dropping 3.6% due to fewer customers

Nice Pie

Instead, the experts Charles spoke to said the company had to return to a more durable sales growth pattern. This includes innovating at lower prices rather than discounting core items; implementing a more frequent cadence of menu innovation; and relaunching successful past menu items such as Fried Apple Pies.

The experts were more bullish on a second-half sales improvement this year, fueled by the addition of McCrispy Strips to its menu.

Despite this, Charles expects its shares to remain range-bound between $305-$320 until more durable sales growth is evident.

He has a price target of $305 on the stock and a Hold rating.

Is MCD a Good Stock to Buy Now?

On TipRanks, MCD has a Moderate Buy consensus based on 14 Buy and 10 Hold ratings. Its highest price target is $364. MCD stock’s consensus price target is $334.74 implying an 8.35% upside.

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