McDonald's finally reaches easier sales comps so I'm raising my target price on this stock pick

06/10/2013 4:26 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

I can’t quite say “like clockwork” since I expected McDonald's (MCD) to start reporting better year to year same store sales growth in April, but May is pretty close.

This morning McDonald’s reported that May same store sales were up 2.6% year over year. That comes after a drop of 0.6% in April.

For the last quarter of 2012 and the first quarter of 2013 McDonald’s has been facing very tough year to year sales comparisons that made growth seem very disappointing. In February, for example, same store sales fell by 1.5%, which seemed even worse in comparison to a 7.5% pickup in same store sales in February 2012.

March was the last month where the company faced really tough year-to-year comparisons, and April was supposed to mark a turn to easier times. But in the event slower sales in China as a result of fears of avian flu and in Europe as a result of continued recession hit April sales growth.

In May, however, the company showed a pickup of 2.4% in same store sales in the United States thanks to McDonald’s everyday value menu and new product introductions such as the Premium McWrap. In Europe comparable sales climbed 2% as positive results from the United Kingdom and Russia outweighed disappointing growth in Germany and France. Sales growth in China continued to lag as fears of avian flu kept customers out of any restaurant selling chicken and same store sales in Japan were flat.

On finally reaching the transition to easier comparisons—and on likely summer sales momentum from new products such as the Egg White Delight version of the iconic Egg McMuffin, I’m raising my December 2013 target price to $110 from a prior $106. McDonald’s is a member of my Jubak’s Picks portfolio http://jubakpicks.com/ .

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , I liquidated all my individual stock holdings and put the money into the fund. The fund did not own shares in McDonald’s as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/

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