McDonald's Q4 U.S. Comps Growth Estimate Raised From 3% To 4.5% At Stephens

• Shares of McDonald's Corporation (NYSE: MCD) hit a new 52-week high of $118.75 Wednesday morning and are higher by more than 25 percent since the start of 2015.
• Will Slabaugh of Stephens maintained an Overweight rating on McDonald's with a price target boosted to $130 from a previous $125.
• The analyst noted that McDonald's "seems to be leading quick service's rise" and its fourth quarter comps may come in better than previously expected.

The fast food chain's turnaround strategy began showing signs of life in 2015.

In a report published Wednesday, Will Slabaugh added further conviction to support McDonald's turnaround plans are yielding results. The analyst raised his fourth quarter U.S. same-store sales growth estimate to +4.5 percent from a previous 3 percent. Accordingly, the company's full-year fiscal 2015 U.S. same-store growth estimates were raised to +0.2 percent from a prior -0.2 percent.

Slabaugh said McDonald's is capturing incremental business from the "improving" low-to-middle income consumer who are now eating out more often compared to in the past. The analyst also noted that McDonald's is taking share from its casual dining peers as part of a "value-driven trade down."

Related Link: McDonald's Beats Q3 Expectations, Shares Surge

Slabaugh stated that recent conversations with industry insiders and franchisee individuals indicate that McDonald's "continues to gain more than its fair share" due to the newly implemented all-day breakfast offering, a better than expected performance from the buttermilk chicken sandwich, improved marketing programs, and "general positive brand buzz" from consumers.

Slabaugh's conversations "reflected positively" around the soon to be launched "2 for $2" campaign which could recapture "the value mindshare" among its consumers.

Bottom line, McDonald's continues to focus on its core competencies of high quality value, convenience, and its brand. In addition, the current "value-heavy" restaurant environment "plays into the hands of McDonald's" given its scale and marketing abilities.

Shares remain Overweight rated with a price target raised to $130 from a previous $125.