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1. Company Snapshot

1.a. Company Description

McDonald's Corporation operates and franchises McDonald's restaurants in the United States and internationally.Its restaurants offer hamburgers and cheeseburgers, chicken sandwiches and nuggets, wraps, fries, salads, oatmeal, shakes, desserts, sundaes, soft serve cones, bakery items, soft drinks, coffee, and beverages and other beverages, as well as breakfast menu, including biscuit and bagel sandwiches, breakfast burritos, hotcakes, and other sandwiches.As of December 31, 2021, the company operated 40,031 restaurants.


McDonald's Corporation was founded in 1940 and is headquartered in Chicago, Illinois.

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1.b. Last Insights on MCD

McDonald's recent performance was driven by strong Q2 earnings and revenue beat, fueled by solid demand across its global markets and ongoing investments in digital and menu innovation. The company's focus on value offerings, including reduced combo meal prices, is expected to drive top-line gains and improve affordability for budget-conscious shoppers. Additionally, McDonald's strategic progress in international operations and renewed focus on everyday value are positioning the company to gain market share and deliver stable earnings in a volatile macro environment. The company's digital growth and menu innovation are also expected to drive top-line gains, with the launch of a new online ordering experience in partnership with DoorDash.

1.c. Company Highlights

2. McDonald's Q3 Earnings: A Mixed Bag

McDonald's delivered a global comparable sales growth of 3.6% in Q3, with adjusted earnings per share (EPS) of $3.22, slightly below estimates of $3.33. Total restaurant margin dollars exceeded $4 billion, a 4% increase in constant currency. The company's U.S. business saw a 2.4% comp sales growth, driven by the McValue platform and Extra Value Meals (EVM). Despite a challenging consumer environment, McDonald's remains focused on its value strategy, with a 5% increase in its dividend, marking its 49th consecutive year of dividend increases.

Publication Date: Nov -06

📋 Highlights
  • Global Sales Momentum:: Achieved 3.6% global comparable sales growth and 6%+ system-wide sales growth in constant currency, despite macroeconomic challenges.
  • Bifurcated U.S. Consumer Trends:: High-income U.S. traffic rose nearly double digits, while low-income QSR visits fell high single digits, prompting expanded EVM discounts (15%) to capture 30% of sales.
  • Margin Resilience:: Total restaurant margin dollars exceeded $4 billion (4% increase in constant currency), driven by $5 Sausage McMuffin and $8 Big Mac meal success.
  • Shareholder Returns:: Announced 5% dividend increase (49th consecutive raise) and $75M Q4 marketing co-investment to support franchisees amid inflationary pressures.
  • Q4 Growth Outlook:: Expects accelerated U.S. comp sales growth from lapping a food safety incident, a successful MONOPOLY promotion, and beverage tests in 500 U.S. restaurants to drive traffic.

Segment Performance

The company saw a bifurcated consumer base in the U.S., with lower-income consumers experiencing a decline in QSR traffic, while higher-income consumers saw growth. To address this, McDonald's introduced EVM, including a $5 Sausage McMuffin with Egg meal and an $8 Big Mac meal, which have performed well. The company measures success by gaining share of lower-income consumer traffic and improving value and affordability experience scores.

Operational Highlights

McDonald's priorities for capital allocation remain unchanged, focusing on investing in opportunities to grow the business and drive strong returns, and returning remaining free cash flow to shareholders. The company is testing its CosMc's beverage platform globally, with a focus on driving incremental traffic and margin. Ian Borden cited insufficient top-line growth to offset inflationary pressures as the reason for U.S. McOpCo margin contraction in 3Q.

Outlook and Valuation

McDonald's expects comp sales growth to accelerate in Q4 in the U.S., driven by lapping a food safety incident and the rehit of EVM price points. Analysts estimate next year's revenue growth at 5.7%. With a P/E Ratio of 26.02 and an EV/EBITDA of 19.1, the market seems to be pricing in a moderate growth trajectory. The Dividend Yield of 2.32% and Free Cash Flow Yield of 3.16% indicate a relatively attractive return profile.

Consumer Trends and Competitive Landscape

The fast casual segment has been weaker this year, but McDonald's has seen evidence of share shift from fast casual into QSR among higher-income consumers. The company expects the promotional environment to remain competitive, with players trying to balance pricing to offset inflationary pressures while delivering value to consumers. McDonald's is focused on providing predictability and consistency in its value offers, with platforms like McValue and EVM.

3. NewsRoom

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If You Think a Selloff Is Near, Grab Some Insurance with These 3 Stocks

Dec -04

Source: 247wallst.com

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Beacon Pointe Advisors LLC Sells 173 Shares of McDonald’s Corporation $MCD

Dec -02

Source: defenseworld.net

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Blueshift Asset Management LLC Sells 380 Shares of McDonald’s Corporation $MCD

Dec -02

Source: defenseworld.net

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Market Today: Crypto Rout, Omnicom Cuts, Nvidia--Synopsys Deal

Dec -01

Source: gurufocus.com

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Time to Shore Up Your Personal Portfolio With These 3 Bullet-Proof Blue-Chip Stocks

Dec -01

Source: 247wallst.com

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2 Steadier Dividend Stocks If You're Looking to Side-Step a Stock Market Correction

Dec -01

Source: 247wallst.com

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McDonald's Shares Cross Below 200 DMA

Dec -01

Source: forbes.com

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First Look: Airbus drops, Crypto slides, Cyber Monday

Dec -01

Source: gurufocus.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.00%)

6. Segments

International Operated Markets

Expected Growth: 5.0%

McDonald's international operated markets driven by digital transformation and menu innovation

U.S.

Expected Growth: 2.5%

Driven by digital transformation and menu innovation, McDonald's U.S. segment is expected to grow

International Developmental Licensed Markets & Corporate

Expected Growth: 5.2%

Increasing demand in international licensed markets and corporate operations drives growth

7. Detailed Products

Hamburgers

McDonald's offers a variety of hamburgers, including the iconic Big Mac, Quarter Pounder, and Cheeseburger. These sandwiches typically consist of a cooked patty of ground beef, served on a bun with lettuce, cheese, pickles, and condiments.

Chicken Sandwiches

McDonald's chicken sandwiches, such as the McChicken and McChicken Biscuit, feature a breaded and fried chicken patty served on a bun with lettuce, cheese, and condiments.

Breakfast Items

McDonald's offers a range of breakfast items, including the Egg McMuffin, Sausage Biscuit, and Hotcakes. These items typically feature eggs, meat, and cheese served on a bun or with syrup.

Salads

McDonald's offers a variety of salads, including the Southwest Buttermilk Crispy Chicken Salad and the Bacon Ranch Grilled Chicken Salad. These salads feature mixed greens, vegetables, and often grilled chicken or crispy chicken strips.

Fries and Sides

McDonald's fries are a popular side dish, cooked to a crispy golden brown. The company also offers other sides, such as Apple Slices and Side Salads.

Desserts

McDonald's offers a range of desserts, including the iconic Apple Pie, McFlurry, and Ice Cream Cone. These sweet treats are often served as a finishing touch to a meal.

Beverages

McDonald's offers a variety of beverages, including soft drinks (such as Coca-Cola and Sprite), coffee, tea, and juice. The company also offers a range of specialty drinks, such as milkshakes and frappes.

8. McDonald's Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for McDonald's is moderate due to the presence of alternative fast-food chains and healthier dining options. However, McDonald's has a strong brand and customer loyalty, which mitigates this threat to some extent.

Bargaining Power Of Customers

Customers have a high bargaining power due to the abundance of fast-food options and the ease of switching to competitors. Additionally, customers are increasingly demanding healthier and more sustainable options, which can pressure McDonald's to adapt to these changing preferences.

Bargaining Power Of Suppliers

McDonald's has a large and diverse supply chain, which reduces the bargaining power of individual suppliers. The company's significant purchasing volume and long-term contracts also give it negotiating leverage with suppliers.

Threat Of New Entrants

The threat of new entrants in the fast-food industry is relatively low due to the high barriers to entry, including significant capital requirements, established brand recognition, and complex supply chain logistics. However, new entrants can still disrupt the market with innovative concepts or technologies.

Intensity Of Rivalry

The fast-food industry is highly competitive, with numerous established players and new entrants vying for market share. McDonald's faces intense competition from other fast-food chains, such as Burger King, Wendy's, and KFC, as well as from newer, trendy concepts and meal delivery services.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 107.88%
Debt Cost 4.00%
Equity Weight -7.88%
Equity Cost 6.97%
WACC 3.76%
Leverage -1368.49%

11. Quality Control: McDonald's Corporation passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Booking

A-Score: 6.3/10

Value: 3.8

Growth: 8.7

Quality: 8.0

Yield: 1.0

Momentum: 7.5

Volatility: 8.7

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Yum!

A-Score: 5.9/10

Value: 4.0

Growth: 4.8

Quality: 6.4

Yield: 4.0

Momentum: 7.0

Volatility: 9.3

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PulteGroup

A-Score: 5.8/10

Value: 5.9

Growth: 8.8

Quality: 7.6

Yield: 2.0

Momentum: 4.0

Volatility: 6.3

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McDonald's

A-Score: 5.5/10

Value: 3.6

Growth: 4.8

Quality: 6.5

Yield: 4.0

Momentum: 4.0

Volatility: 10.0

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Starbucks

A-Score: 4.8/10

Value: 3.6

Growth: 5.6

Quality: 4.3

Yield: 5.0

Momentum: 3.0

Volatility: 7.3

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Chipotle Mexican Grill

A-Score: 3.9/10

Value: 2.2

Growth: 8.4

Quality: 5.7

Yield: 0.0

Momentum: 1.0

Volatility: 6.0

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

311.23$

Current Price

311.23$

Potential

-0.00%

Expected Cash-Flows