You Should Be Accumulating McDonald’s on the Pullback

McDonald's Corporation (MCD) turnaround over the last 12 months has been very impressive as new CEO Steve Easterbrook’s initiatives have considerably boosted the company’s sales.

Although the stock is down over 10% from its 52-week highs, I think investors should consider adding the stock on the pullback for long-term growth.

Let's dig into the numbers

In the second quarter, McDonald’s posted earnings per share of $1.25, missing consensus estimates by $0.13.
On the other hand, the company’s revenue came in at $6.27 billion, a drop of 3.5% compared to last year. The company’s dividend upsurges have been trivial in recent years. As a matter of fact, the company was going through some hard times, observing same-store sales declining in the United States.

However, the company is now moving on the right track under the leadership of Easterbrook. Easterbrook introduced all-day breakfast in the United States to glowing reviews.
You Should Be Accumulating McDonald’s on the Pullback
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The company has also decided to use antibiotic-free chicken as well as cage-free eggs.

Since the launch of all-day breakfast, the company has expanded its menu and gradually made its food healthier. By making the food healthier, the company is taking a smart step as it will help the company to keep up with the on-going health trend. The company may fall out of favor for a short span of time mainly due to the fluctuating trends, but ultimately consumers are coming back at the stores.

The average Wall Street analyst is expecting EPS growth of over 11% this year. That follows declining earnings per share over much of 2014 and 2015.

Apart from this, the company has a great opportunity to gain benefits from the gradually rising consumption of coffee given a majority of consumers have given up drinking soda as well as other sugary beverages and started consuming coffee.

Moreover, macroeconomic factors are also offering a tailwind for coffee consumption. The company has been operating its McCafe for over 20 years, but with a different concept. As a result, in a continuously evolving market, it is likely that McCafe will help the company to move ahead of competitors in the approaching years.

A turnaround in the making

Looking ahead, McDonald’s future looks bright. The stock may have pulled back recently, but I think investors should consider adding it to their portfolios on the pullback. McDonald’s prospects, along with its generous dividend yield, make it a great pick.
Published on Oct 5, 2016
By Prudent Investor

Copyrighted 2020. Content published with author's permission.

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