McDonald's Serving Up a Turnaround?
This correction in the world's most famous fast-food chain's stock should only be temporary, writes MoneyShow's Jim Jubak, also of Jubak's Picks.
Wait until next year. I think that’s the message in McDonald’s (MCD) disappointing November 8 report of same-store sales numbers.
Sales at stores open for at least 13 months fell 1.8% in October. That was the first monthly decline in same-store sales in nine years for McDonald’s. Even taking into account a calendar shift that put one less Saturday in October this year than in 2012, the drop sent a significant signal:
- competitors have upped their game
- a soft economy in the United States, China, and Europe has resulted in cutthroat competition on price
- and McDonald’s recent success in taking market share has resulted in very tough month-to-month growth comparisons
These three factors suggest that investors will have to wait until April or May of 2013 to see a sustained upward move in McDonald’s shares. (McDonald’s is a member of my Jubak’s Picks portfolio.)
Economic growth will—probably—pick up in China and the United States in the first half of 2013. McDonald’s is putting in place new menu items and sales initiatives that will, over time, blunt the current momentum of Burger King (BKW), Taco Bell (owned by Yum! Brands (YUM)) and Wendy’s (WEN). And the toughest same-store sales growth comparisons will be behind the company by April 2013.
I think the stock is likely to be a market performer until then—with its fortunes tied to the trends in the larger market.