McDonald’s stock hits record high as turnaround takes hold

Across the globe, gross sales at restaurants open a minimum of 13 months improved 4% whilst within the United States of America registered a hike of 0.9%. That should reassure investors that the latest results weren’t a fluke.

Investors were also impressed, as shares of McDonald’s rose 6% to a new all-time high on Thursday. As we reported in April, sales at McDonald’s had been declining for the past two years, with the restaurant reporting a 2.4% decline in sales to €25.3bn ($27.4bn) in 2014 as net income fell to €4.4bn ($4.76bn).

The all-day breakfast was not reflected in earnings for the third quarter, but company officials have already touted its success.

Morningstar analyst R.J. Hottovy said he was most impressed by the return to USA growth.

Global sales at established restaurants were up a much better-than-expected 4 percent in the third quarter, ending six straight quarters of flat or falling results.

‘As we begin fourth quarter, comparable sales are expected to be positive in all segments.

It’s not just one lucky quarter, either. McDonald’s diluted earnings per share before extraordinary items have grown the past two quarters, while it’s sagged in the past four quarters at Chipotle.

In my opinion, this is still a real estate and franchising company that includes selling burgers as one part of their business model. A McDonald’s board member last week told The Wall Street Journal that it is nearing a decision on whether to do anything with its real estate.

Many analysts have been skeptical that it would go the REIT route, not least because it could distract from the focus on McDonald’s turnaround.

McDonalds has been trying to turnaround its business after Mr. Easterbrook joined in March 2015.

The company has also implemented strategies to improve order accuracy, Easterbrook said.

McDonald’s rallied hard as investors finally saw positive developments out of the real estate giant.

Tweaks to food preparation included toasting its buns longer and searing burgers.

A few restaurant owners also said the launch has forced them to hire more employees, which has increased costs. “Restaurants are shaving seconds off average service times at drive-throughs, thanks to simpler menu boards, he said”, Jargon writes. The location is across from McDonald’s.

The fast-food chain in recent months has unveiled an array of changes to bolster operations in its home market, including streamlining its menu, allowing regional markets to develop their own products and placing greater emphasis on the quality and freshness of ingredients. This group, by operating 80% of USA stores, is thus responsible for 80% of the 50% of global operating income the US provides.

It will take McDonald’s several more quarters of strong performance to make up all the ground it lost during its prolonged sales slump.