4 potential talking points at McDonald's investor meeting

  • McDonald's is scheduled to hold an investor meeting on Monday after it reports its third-quarter results.
  • The company is expected to share more details on driving digital sales growth, implementing its tech investments and building new restaurants.
  • McDonald's stock, which has a market value of $167 billion, has risen 9% so far this year.

McDonald's swift recovery from the coronavirus pandemic has prompted investors to ask how the fast-food giant plans to keep fueling sales growth.

The company is scheduled to answer some of those questions on Monday. After it reports its third-quarter earnings, it will hold a virtual meeting with investors to discuss its strategic priorities.

As it bounces back from the pandemic, McDonald's U.S. same-store sales turned positive in its latest quarter, rising nearly 5%, according to an October release of its preliminary results. While transactions remain negative, customers are spending more on their orders.

Its franchisees are very optimistic about their six-month business outlook and are feeling more confident about their relationship with the franchisor, based on Kalinowski Equity Research's survey. The quarterly survey, which was published Oct. 23, asks a portion of U.S. franchisees about a range of topics, including quantifying their relationship with McDonald's and their forecast for the business.

The stock, which has a market value of $167 billion, has risen 9% so far this year, as of Friday's close. But analysts have price targets as high as $260 per share, about $43 higher than it was trading on Friday.

Investors will be looking for updates on how McDonald's plans to capitalize on that momentum to drive its sales higher — or even turn traffic positive.

Here's what will likely be part of McDonald's investor presentation:

Digital sales

The pandemic has accelerated many restaurant companies' push into online ordering, but investors will want more details on how McDonald's plans to keep customers coming back to its app.

Recent collaborations with rapper Travis Scott and reggaeton singer J. Balvin pushed younger consumers to use the app to order the meals, and analysts expect more celebrity partnerships in the future.

Technology investments

McDonald's is due for an update on its other tech investments, like its acquisitions of Apprente and Dynamic Yield.

Analysts expect that Apprente, which uses artificial intelligence to understand drive-thru orders, could be ready to scale across its system by next year. Cowen analyst Andrew Charles said in a note to clients that the technology would drive sales because it would improve cashiers' speed.

Building and upgrading restaurants

Another key focus will be McDonald's plans for remodeling old restaurants and building new ones. The company hasn't issued an outlook on its capital expenditure spending since former CEO Steve Easterbrook was still at the helm, more than a year ago.

Current CEO Chris Kempczinski, who is looking to put his stamp on the company's strategy, told analysts on the company's second-quarter conference call that the company plans to get back to "significant unit growth" in Europe, and analysts expect its pace of remodels to slow down. In 2019, McDonald's spent $2.4 billion on capital expenditures, with roughly $1.7 billion going toward existing restaurants.

Menu changes

The company could also be sharing some menu news. Its much-anticipated chicken sandwich is testing in several markets and could be launched next year. RBC Capital Markets analyst Christopher Carril called it a "potentially significant opportunity." After all, the popularity of Popeyes' chicken sandwich has pushed the chain to report double-digit same-store sales growth, even during the height of pandemic lockdowns.

The crisis also led McDonald's to trim its menu. While it has been slowly bringing back some items, its all-day breakfast menu and other items have yet to reappear on the menu. The simpler menu has brought cheers from franchisees, but permanently killing too many favorites could drive away customers.

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