MCD McDonalds Corp

   (FROM THE WALL STREET JOURNAL 1/25/16) 
   By Steven Russolillo 

McDonald's Corp. chief Steve Easterbrook has accomplished a lot nearly one year into the job. There is reason to believe the positive momentum can continue.

From all-day breakfast and other menu changes to improved operations and better customer service, a number of Mr. Easterbrook's changes have been well received, while pleasantly surprising Wall Street.

For instance, analysts a year ago sported an average 12-month price target on McDonald's of $95. Only one-fifth of them had buy ratings.

Much has changed. The stock now trades near $120 after surging 26% last year. And nearly half of analysts rate it a buy.

The rally caught fire in October as investors cheered a strong showing from U.S. restaurants. That contributed to a 4% gain in global same-store sales, the best for McDonald's in more than three years.

More good news is expected for the quarter ended in December. Analysts polled by FactSet forecast fourth-quarter earnings of $1.23 a share, up 9% from a year ago. That has been raised from $1.17 in September.

Global same-store sales are expected to rise 3.2%, thanks in part to the early success of all-day breakfast.

In a study published last month, NPD Group Inc. found about one-third of customers who purchased breakfast items in the afternoon or later hadn't actually been to a McDonald's prior to the all-day breakfast launch.

Furthermore, many competitors are struggling at a time when the Golden Arches are bouncing back.Chipotle Mexican Grill Inc.'s difficulties are well documented. Yum Brands Inc., which operates KFC and Pizza Hut, has lost a quarter of its market value since May as it embarks on splitting off its China unit.

Even relative upstarts such as Potbelly Corp. and Noodles & Co., which were expected to eat many of the larger chains' lunch, have struggled recently.

And while McDonald's shares aren't cheap, they still trade at a discount relative to many of its competitors, including Wendy's Co., Panera Bread Co. and Chipotle.

For McDonald's investors, there's still golden in them thar arches.

(END) Dow Jones Newswires

January 25, 2016 02:47 ET (07:47 GMT)

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