Citi nudges McDonald’s share price target only slightly amid international headwinds

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On Tuesday, Citi updated its financial outlook for McDonald’s Corp (NYSE:), with a slight increase in the share price target to $312 from the previous $310, while keeping a Neutral rating on the stock. The revision follows the fast-food giant’s recent disclosures regarding economic challenges in some of its significant internationally operated markets (IOM), including headwinds in France.

The adjustment is grounded in the latest update of the “McMacro” data set, which analyzes macroeconomic indicators across McDonald’s large IOM markets. This data suggests a gradual economic slowdown and significant year-over-year shifts as these markets navigate beyond the initial hurdles of reopening post-pandemic.

Despite these challenges, McDonald’s has emphasized the importance of value as a central aspect of its brand identity, especially in the current economic climate. Nevertheless, concerns similar to those in the United States have been raised about the customers’ capacity to continue absorbing price increases, especially if employment and wage growth decelerate. The year-over-year employment growth in IOM markets has already slowed to below 1%.

For the first quarter of 2024, Citi has set its expectations for McDonald’s same-store sales (SSS) growth at +2% in the United States, which is slightly below the consensus estimate of +3.0%.

In IOM markets, Citi forecasts a +1% SSS growth, compared to the street’s more optimistic +3.3%. For the International Developmental Licensed (IDL) segment, Citi predicts flat SSS, in contrast to the street’s expectation of a +0.9% increase. These projections reflect a cautious stance towards McDonald’s performance in light of the current economic indicators.

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