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McDonald's on Expansion Spree, Boosts Delivery Services

Zacks Equity Research

In an effort to expand its footprint in the United States, McDonald’s Corp. (MCD) recently said in a statement that the company is expanding the McDelivery service with DoorDash.

McDonald’s, which had launched a food delivery service with Uber Eats in 2017, started a delivery service with DoorDash in Houston, TX, across more than 200 McDonald's locations last month. The recent deal will enable the company to expand from 9,000 to more than 10,000 restaurants via these two partners in all 50 states.

McDonald’s and DoorDash deal will also give customers premier access to their favorite McDonald’s menu items whenever and wherever they want via mobile order and pay or McDelivery.

As part of the major sales boosting efforts, this Chicago-based burger giant is undertaking digital initiatives to better serve customers, with nearly all of its U.S. restaurants now using digital menu boards. Additionally, McDonald’s continues to roll out mobile order and pay, with a new curbside check-in option. Already, it has launched the option in nearly all 20,000 U.S. restaurants.

To provide augmented convenience to customers, McDonald’s is increasingly focusing on delivery. The company provides the delivery service from more than 20,000 restaurants in above 75 countries via Uber Eats in the United States, SkipTheDishes in Canada as well as Uber Eats, Glovo and Deliveroo in Italy.

In the current year, the company expects food delivery to be a $4 billion business for the chain and its franchise businesses. Furthermore, McDonald’s continues to add new partners that allow them to meet untapped customer demand and provide customers with a choice of delivery partners where McDelivery remains a top priority.

Backed by these aforementioned initiatives, the company is expected to boost guest traffic, accentuate on operational excellence, increase product innovation, offer a value menu and roll out more limited-time offerings. This, in turn, might lead to solid comparable sales. In second-quarter 2019, global comps grew 6.5%, marking its 16th straight quarter of positive comps. Moreover, U.S comps increased 5.7%.

A glance at the company’s price performance year to date shows that this Zacks Rank #3 (Hold) stock has gained 22.8%, comparing unfavorably with the industry’s 30.6% growth. Nonetheless, McDonald's efforts to strengthen its position through various sales initiatives along with increased focus on franchising are expected to drive growth moving ahead.

Key Picks

Better-ranked stocks worth considering in the same space include Brinker International, Inc. EAT, Darden Restaurants, Inc. DRI and Restaurant Brands International Inc. QSR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Brinker International reported better-than-expected earnings in the trailing four quarters, the average being 4.4%.

Darden and Restaurant Brands have an impressive long-term earnings growth rate of 10.1% and 9.3%, respectively.

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Click to get this free report Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report Restaurant Brands International Inc. (QSR) : Free Stock Analysis Report Brinker International, Inc. (EAT) : Free Stock Analysis Report McDonald's Corporation (MCD) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research