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McDonald's Buys Dynamic Yield, Boosts Technology Offerings

Zacks Equity Research

McDonald's Corporation MCD announced that it entered an acquisition agreement with Dynamic Yield Ltd. By acquitting this leader in personalization and decision logic technology, McDonald’s plans on improving technological offerings and customer experience. On the completion of the acquisition, McDonald’s will become the only owner of Dynamic Yield and will continue to invest in its core personalization product team.

After testing this technology in several U.S. restaurants, McDonald’s plans on expanding this facility in other national and international restaurants in 2019. The company will also begin to integrate this technology into all of its digital customer experience such as self-order kiosks and Global Mobile App.

This move will benefit McDonald’s to fortify technological capabilities. The company continues to experience positive results across the majority of its high-growth markets by focusing on new products alongside delivery growth, value and breakfast platforms’ enhancement.

Driven by robust technological innovations, McDonald’s have been continuously driving comparable sales. This in turn has a good bearing on the company’s earnings. McDonald’s delivered better-than-expected earnings for the 18th straight quarter when it posted fourth-quarter 2018 results.

Backed by such impressive earnings trend, shares of McDonald’s have gained 43.4% over the past two years, outperforming the industry’s 32.2% growth.

 

Dynamic Yield to Boost McDonald’s Digital Offerings

By acquiring Dynamic Yield, McDonald’s can utilize the decision technology to provide personalized customer experience. With the help of this technology, the restaurant can have displayed Drive-Thru menus, depending on time, weather, restaurant traffic and popular items. The technology will also enable customers to view preferred menus from their personal choice algorithm.

We believe that this will further add to the company’s already established digital offerings. All of McDonald’s current restaurants now use digital menu boards. Also, it continues to roll out mobile order and pay, with new curbside check-in option. The company already launched the option in nearly all of the 20,000 U.S. restaurants. To provide augmented convenience to customers, McDonald’s is increasingly focusing on delivery. The company provides delivery from over 19,000 restaurants.

Our Take

We believe that the integration of Decision Technology in McDonald’s system will help it drive top-line growth in the quarters to come. As it is, McDonald’s sales boosting initiatives are driving global comparable sales (comps). In fourth-quarter 2018, global comps grew 4.4%, marking its 14th straight quarter of positive comps.

This move will enable McDonald’s to have a competitive advantage over peers such as Domino’s DPZ, Chipotle CMG and Yum! Brands YUM.

McDonald’s currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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McDonald's Corporation (MCD) : Free Stock Analysis Report
 
Domino's Pizza Inc (DPZ) : Free Stock Analysis Report
 
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