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McDonald's US Sales Likely Hit New Low in Second Quarter, Deutsche Bank Says

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McDonald's US Sales Likely Hit New Low in Second Quarter, Deutsche Bank Says

McDonald's (MCD) US comparable sales likely reached a new low during the second quarter amid a weak macro backdrop, Deutsche Bank said in a note emailed Thursday.

Crude and gasoline prices soared in the aftermath of the Iran war, weighing on consumer sentiment. Energy prices have come down as the US and Iran engaged in talks and agreed to a memorandum of understanding in June.

Inflation-adjusted sales at eating and drinking places fell in May year on year, the National Restaurant Association said last month.

The fast-food giant's US same-store sales are expected to have troughed in the second quarter, Deutsche Bank said.

"Sentiment on (McDonald's) leans largely negative given concerns on underlying US momentum, unit growth and free cash flow as (McDonald's) approaches a new remodel cycle," Deutsche Bank analyst Lauren Silberman said.

Comparable sales in the US will rebound as the economic environment improves, particularly for low-income consumers, and other corporate actions around marketing and value offerings pay off, Silberman said.

McDonald's stock is down about 9.6% year to date.

The brokerage sees relatively stable trends at McDonald's international operations that could drive potential upside for second-quarter International Operated Markets same-store sales, Silberman wrote.

"We believe a lot of negativity is priced into this powerful global company and defensive business model, and any signs of improving (same-store sales) should support sentiment (and valuation)," Silberman added.

Earlier this year, McDonald's reported better-than-expected first-quarter results despite a challenging environment, with comparable sales growing ahead of Wall Street estimates.

Deutsche Bank has a buy rating on McDonald's shares and a $325 price target.

Price: $276.52, Change: $-1.73, Percent Change: -0.62%

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