After rising steadily for much of 2007, shares of McDonald’s Corp. have fallen off roughly 8% so far this year on weakening trends in the fast food industry.
But the stock may soon get a lift now that those trends appear to have improved in February, according to David Palmer at UBS. As a result, the analyst raised his U.S. same-store sales estimate for the month to 8%. Another boost may come from the fact that an extra day (Feb. 29) will be the books due to leap year accounting, he told clients in a note.
Mr. Palmer’s same-store sales estimates for Europe and the Asia, Pacific, Middle East and Africa region also climbed to 6%. As a result, his first quarter and 2008 (US$3.23) earnings per share (EPS) estimates both climb by a penny. But a weak U.S. dollar could boost the company’s EPS even further by four percentage points or more than 2008, the analyst added.
He continues to rate McDonald’s a “buy” with a US$67 price target, which represents upside of 24% compared to Wednesday’s closing price of US$53.94.
However, Mr. Palmer continues to see Burger King Holdings Inc., which is down 5% year-to-date, outpacing the broader industry. He has a same-store sales forecast of 5% or higher for the March quarter.
For Yum! Brands Inc., which operates KFC, Pizza Hut and Taco Bell, he has a 4% same-store sales estimate for the first quarter.
