Why McDonald's Turnaround Is Still In The 'Early Innings'

In a new report, Deutsche Bank analyst Karen Short discussed why McDonald’s Corporation (NYSE: MCD) is still in the early stages of its turnaround story.

McDonald’s stock is up 13 percent in an extremely weak market since its Q3 earnings, and Short believes that the positive numbers the company showed last quarter are a sign that a prolonged period of strong sales has already begun.

Looking Into McDonald's Future

According to Short, Deutsche Bank expects that McDonald’s will report strong Q4 domestic same-store sales (SSS) growth in the 3.0–4.0 percent range on January 25.

“The combination of the menu refinement and execution efforts from earlier in 2015 along with the introduction of all day breakfast could serve to drive some U.S. SSS upside vs consensus of +2.6 percent,” she explained.

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While Short has low expectations for the company’s international performance in Q4 due to macroeconomic headwinds, she believes the domestic market, which makes up about 40 percent of McDonald’s business, will be strong enough to deliver a positive quarter overall.

Deutsche Bank maintains a Buy rating on McDonald’s and a $130 price target for the stock.

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