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- A Stock to Buy On Q3 Earnings Agenda: McDonald's
A Stock to Buy On Q3 Earnings Agenda: McDonald's
McDonald’s strong results fires a trend-following entry with a fresh ‘Buy’ position and a mid-term ‘Hold’ strategy. Some stocks of the restaurant business segment lost their steam in summer and early autumn, but the technical correction phase is seemingly over. Investing crowd would turn increasingly bullish on fast-food chains, with several competitive names are going to report over the next few weeks. Yet, McDonald's looks like the undisputed leader among them in terms of anti-crisis bets.
It has already outpaced rival Chipotle’s 11% growth, led by digital, marketing, and price leverage, due to McDonald's larger exposure to international markets. McDonald's grew 8.3% in developing and 10.5% in developed markets, thanks to Arcos Dorados, which is McDonald’s franchisee in Latin America and the Caribbean. Digital services gave 40% of McDonald’s net sales in its top-9 markets, which is a solid ground for further expansion, while its domestic U.S. market grew by 8.1% only. The other U.S. operating chain that is very digital is Jack in the Box, which would be closely watched after its Q3 report on November 21.
The chain produced 14% top line growth for its sales of $6.69 billion vs $6.56 expected, to mark its new all-time record since October 2015. The only important detail is that its EPS (equity per share) was less than $1.5, compared to $3.17 in the newly reported quarter. McDonald's kept this very high bar on profit since the second quarter, even though the average analysts’ forecast was a likely reduction to $3.00.
McDonald’s is still traded nearly one-eighth cheaper compared to its July peak pricing, even though it already recovered by more than 2.5% after strong reports on October 30, which covered almost all regions and business segments. A systematic crawling styled comeback towards a $300 target is a most likely scenario.
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