McDonald's (MCD) PT Raised to $175 at BofA/Merrill Lynch; Remains Top Pick

BofA/Merrill Lynch raised its price target on McDonald's (NYSE: MCD) to $175.00 (from $165.00) while maintaining a Buy rating. The firm also reiterated the stock as a top pick.

Analyst Gregory Francfort cited:

1.) Value: Aggressive value menu plans for early 2018.

2.) Unit economics: MCD is one of few restaurant companies that can attain better franchisee economics than peers on lower price points.

3.) Valuation: On a relative basis to other highly franchised restaurant stocks, MCD continues to screen cheap. We raise GAAP 2017E EPS to $6.60 (from $6.55) and 2018E to $6.85 (from $6.80), primarily due to FX offset by a higher share price used for repurchases. We raise our Price Objective to $175, or a 16x EV/EBITDA multiple (15.5x earlier) on FY’18E earnings (slightly below our multiples for POs for the peerset).

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