Turnaround Comes Early To McDonald?s Stock Beating S&P 500
The golden arches are beckoning investors back after a three-year stagnation for McDonald?s Corp.?s stock.
Gains in the world?s largest restaurant chain have outpaced the Standard & Poor?s 500 Index by about 9 percentage points since Jan. 23, breaking a torpor dating to December 2011 when McDonald?s trailed the equity benchmark by 78 percentage points. The stock fell 0.3 percent to $99.02 a share at 9:36 a.m. in New York.
Emboldened bulls are betting the Oak Brook, Illinois-based company will be ?radically reinvigorated? under new Chief Executive Officer Steve Easterbrook, said David Katz, who oversees about $975 million as chief investment officer at Matrix Asset Advisors Inc. in New York.
As McDonald?s works to right its business, Katz said, ?the stock has very significant upside? from $99.02 a share currently, which is why his firm has been adding to its stake. Plus ?you?re getting paid a 3.4 percent yield to wait? for a turnaround, he said.
There are already signs of rejuvenation. The burger company?s latest quarterly sales and earnings reported last month both beat the consensus of analysts? estimates for the first time in more than two years. CEO Easterbrook predicted a return to growth in the second half of the year.
As the company cuts costs, revamps its menu and sells off company-owned restaurants, it could create a ?snowball effect? of improving margins and earnings, said Will Slabaugh, an analyst at Stephens Inc. in Little Rock, Arkansas.
He upgraded his recommendation on the stock to overweight from equal-weight in January. ?There?s a little bit of a hope trade going on, but not nearly what I think we?ll see if same-store sales start to improve.?