Stock (Symbol)

McDonald’s (MCD)

Stock Price

$157

Sector

Retail & Travel

Data is as of

August 2, 2017

Expected to Report

Oct 24

Company Description

McDonald’s franchises and operates McDonald’s restaurants in 119 countries globally. All restaurants are operated either by the Company or by franchisees. Under the conventional franchise arrangement, franchisees provide a portion of the capital required by initially investing in the equipment, signs, seating and decor of their restaurant businesses, and by reinvesting in the business over time. MCD owns the land and building or secures long-term leases for both Company-operated and conventional franchised restaurant sites. Source: Thomson Financial

Sharek’s Take

McDonald’s (MCD) can now be considered a technology stock as it is continues on a fast-track to digital ordering as well as food delivery via app. Wow, that was quick. A couple qtrs ago I was just imagining what McDonald’s would be like in a few years with kiosks replacing cashiers and now I see kiosks almost every time I go onto a Mickey-D’s. That’s going to save on labor, and with the eventual outcome being computers taking your order and computerized robots making the food and serving it. What’s really gotten things moving is delivering McDonald’s food. McDelivery is now available in 47 countries and more than 7,800 restaurants. In the U.S. MCD uses UberEATS, which is available in 3500 restaurants in America. Yes, the fries won’t stay hot, but 75% of Americans live within 3 miles of a McDonald’s restaurant, so the trip’s not long. Same store sales surged 7% last qtr — a great number that should keep the stock timely. Also, management is now pumping its premium burgers, which have higher profit margins. MCD stock has been on a tear lately — I remember earlier in the year trying to buy-in below $120 and now it’s over $150. What’s more is the P/E has gotten to 24, higher than the median P/E of between 20 and 21 the stock has had the last three years. But now one could argue this is a tech stock — worthy of a higher multiple. I think one thing’s for sure, it’s going to be hard for the stock to decline much with both kiosks and delivery as catalysts. MCD will be added to the Conservative Growth Portfolio today.

One Year Chart

Ugh, I really didn’t want to Buy-high with this Blue Chip stock. But profits surged 19% last qtr as the company easily beat the 11% estimate. The company has now whizzed past analysts estimates in three of the last four qtrs — and I foresee this trend continuing. Sales fell 3% due to some accounting changes with franchisees. 2017 profit estimates have grown from $6.17 to $6.38 and $6.55 the past three qtrs — outstanding. Qtrly profit Estimates are 9%, 12%, 5% and 2% but I think MCD will be continue to “deliver” double-digit profit growth.

Fair Value

I’m taking my Fair Value up from a P/E of 21 to a P/E of 24. I’ve obviously not respected the stock enough in the past. This makes MCD fairly valued here, but with estimates rising and the stock timely I wouldn’t say buying in now would be overpaying.

Bottom Line

McDonald’s is one of the bluest of the Blue Chips, and the Yearly Profit Growth Rate of 13% the past decade is impressive. And now the company has digital ordering and delivery as catalysts to push growth for the forseeable future. I can’t wait for a pullback to buy MCD any longer, and will add the stock to the Conservative Portfolio where it will rank 13th of 32 stocks in the Power Rankings.