Janney Capital Markets analyst Mark Kalinowski upgraded his rating on McDonald's Corp. Friday, saying he expects key sales measures will improve in 2013.
THE OPINION: The analyst upgraded the company's shares to "Buy" from "Neutral" on the possibility that the fast-food giant's sales at established stores would improve. That measure of same-store revenue from sites open at least a year is considered a key indicator of financial health as it strips away the impact of recently opened or closed stores.
Kalinowski said that based on the results of his firm's proprietary survey of franchisees, he expects this measure to increase 1.7 percent in the U.S. for November. That is above some industry measures and his prior expectations for no growth.
McDonald's is expected to report same-store sales on Dec. 10.
After years of outperforming its rivals, McDonald's has struggled recently as long-time rivals Burger King and Wendy's have revamped their menus and rolled out new advertising campaigns, while new menu items bolster Taco Bell's sales growth. Customers are also increasingly flocking to fast-casual chains like Chipotle Mexican Grill and Panera, which offer better quality food for slightly higher prices.
To rev up sales again, McDonald's CEO Don Thompson has said the company will focus on value, highlighting its Dollar Menu.
Kalinowski increased his fourth-quarter earnings estimates for McDonald's by two cents to $1.34 per share. That is a penny more than the average forecast of analysts polled by FactSet.
Kalinowski said that to some degree, the ratings upgrade also is driven by a recent drop in the company's stock price, which makes its shares more attractive to investors.
THE STOCK: McDonald's shares have lost about 12 percent of their value since January. The stock rose 26 cents to $88.35 in Friday afternoon trading. It remains near the low end of its 52-week trading range of $83.31 to $102.22.