McDonald’s Is Coming Back From the Dead, and It’s Not Just Because of $1 Soda

It has been a long haul back from the dead for McDonald’s (MCD) , but signs of life on several fronts continue to emerge.

Credit Suisse analysts raised their price target on McDonald’s by $8 to $157 in a note Thursday, citing “continued momentum,” as “SSS [same store sales] among our franchise contacts have accelerated from 1Q17 [first quarter], with each month better than the last.”

The stock closed Thursday’s session at $151; a year ago, it was trading at $123.09.

Among the menu offerings that have driven growth are $1 soft drinks and $2 small coffee. Additionally, franchisees told the analysts that improving food quality and operations may now be helping to lift market share. Other upcoming changes are a nationwide roll-out of chicken tenders that are now being tested.

“While the stock may look expensive on an absolute basis, we note McDonald’s trades in line or at a discount to most of its franchise peers,” wrote Credit Suisse analysts Jason West and Jordy Winslow.

McDonald's hoping for a continued turnaround.
McDonald’s hoping for a continued turnaround.
McDonald’s earnings were $4.8 a share in 2015 and $5.72 a share in $2016, but Credit Suisse estimates they will be $6.33 and $6.75 a share, respectively, for 2017 and 2018.
Meanwhile on Wednesday, McDonald’s and other companies, including Uber, were able to breathe a sigh of relief when the Department of Labor (DOL) withdrew informal guidance on joint employment and independent contractors instituted in 2015 and 2016 under the Obama administration. The withdrawal nixes the classification of companies with franchise business models as “joint employers” along with their franchisees, reported New York on Thursday.

Trade organizations representing the fast-food industry praised the Trump administration’s move.

“While uncertainty surrounding the new joint employer standard has made it harder for America’s 733,000 franchise owners to grow and create new jobs, we are pleased the DOL is taking first steps to undo this costly regulation created by the previous administration,” said International Franchise Association Vice President of Public Affairs Matt Haller Wednesday in a press release. “That being said, we urge Congress to now recognize the uncertainty and unreasonable costs the NLRB’s [National Labor Relations Board] decision has placed on franchise owners and take action to find a true permanent solution.”

In a pending case involving McDonald’s, the NLRB has sided with the fast food workers, wrote New York.

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