KeyBanc Bullish on McDonald's Stock, Cites Improving Trends and Reasonable Expectations

KeyBanc Capital Markets has reaffirmed its 'Overweight' rating and a $335.00 price target for McDonald's stock, signaling optimism about the fast-food giant's future performance. The firm's positive outlook is underpinned by moderating investor expectations for U.S. sales and indications of modestly improved baseline trends following the company's Monopoly promotion.

Key Takeaways

• KeyBanc maintains an 'Overweight' rating and $335 price target for McDonald's.

• Investor expectations for U.S. performance have settled into a more "reasonable" 1.5-2% range.

• Fourth-quarter results are anticipated to show significant improvement.

• Industry conversations suggest baseline trends have improved since the Monopoly promotion.

A More Reasonable Setup for McDonald's

KeyBanc noted that investor expectations for McDonald's U.S. performance have moderated to the 1.5-2% range. This recalibration has created what the firm describes as a "more reasonable" setup for the company, with fourth-quarter results expected to demonstrate notable improvement. The current trading price of McDonald's stock is above its InvestingPro Fair Value, with analyst targets ranging from $250 to $381.

Signs of Improving Customer Engagement

Industry conversations analyzed by KeyBanc indicate that baseline trends have seen a modest improvement since McDonald's launched its Monopoly promotion. This suggests a potential positive impact on customer engagement and overall sales activity for the fast-food chain.

Valuation and Future Estimates

The $335 price target set by KeyBanc is approximately 25 times their 2026 earnings per share estimate of $13.50 for McDonald's. This compares to the stock's current trading multiple of about 23 times forward earnings. KeyBanc's valuation methodology employs a combination of peer group analysis of free cash flow generation and discounted cash flow analysis, utilizing a terminal growth rate of 1.9% and a weighted average cost of capital of 6.6%.

Mixed Analyst Sentiment

Recent analyst activity shows a range of perspectives on McDonald's. While KeyBanc is optimistic, other firms have adjusted their targets and ratings. TD Cowen lowered its price target to $320 (maintaining a Hold rating) due to weaker-than-expected U.S. same-store sales forecasts. Guggenheim also reduced its target to $295 (keeping a Neutral rating) citing softer industry trends. RBC Capital initiated coverage with a Sector Perform rating and a $320 price target, expressing caution regarding the impact of value offerings on traffic and check sizes. Jefferies, however, maintained a Buy rating with a $360 price target, adjusting its U.S. same-store sales estimate to 2.5% but expecting earnings per share to be slightly below consensus. KeyBanc's reiterated Overweight rating and $335 price target, with a projected U.S. same-store sales growth of 2.5% for the third quarter, align with market expectations.

Sources

• KeyBanc reiterates Overweight rating on McDonald’s stock amid improving trends By Investing.com, Investing.com.