McDonald’s (Shutterstock photo)
Last Thursday, McDonald’s reported consolidated revenue of about $5.87 billion in the third quarter of 2022, a year-over-year decline without adjusting for currency fluctuations, which beat Wall Street’s expectations and started the stock moving to new highs. The company went public in 1965.
Cowen raised its price target from $280 to $293 following the results. In a note Thursday, Cowen restaurant analyst Andrew Charles wrote that “we are encouraged by McDonald’s proven playbook to drive better performance in the US.”
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The burger chain has seen success with recent promotions focused on its core products, such as adult happy meals and celebrity meals. In the third quarter, sales at McDonald’s stores in the US that have been open at least 13 months increased by 6.1%. The hamburger chain was able to drive sales in part by raising its prices. In the third quarter, McDonald’s prices in the US increased by about 10% compared per year on average.
“Consumers are willing to tolerate” price increases because they still see McDonald’s as an affordable brand, CEO Chris Kempczynski noted during an analyst call discussing third-quarter results on Thursday. In fact, McDonald’s has grown its share “among high-income consumers low,” said CFO Ian Burden during the call.
McDonald’s is “positioned as the leading brand in terms of value for money and affordability,” Borden said, noting that some customers are switching from buying meals to buying value items as a way to save. The company uses its rewards program to help create more loyal customers. “Our loyalty program is driving growth and exceeding expectations,” noted Kempczynski.
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