The McDonald's Growth Scare Is Over

06/11/2013 5:00 am EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

A rise in same-store sales last month leads the world's most iconic restaurant into what proposes to be strong summer momentum, writes MoneyShow's Jim Jubak, also of Jubak's Picks.

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

Yesterday, 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 as it turned out, growth was hit by slower sales in China as a result of fears of avian flu, as well as in Europe as a result of continued recession.

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.

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, I liquidated all my individual stock holdings and put the money into the fund. For a full list of the stocks in the fund as of the end of March, see the fund's portfolio here.

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