McDonald's Top-Line Momentum Continues
No changed planned for our fair value estimate, as we see shares as fairly valued today.
Wide-moat
With the completion of its China/Hong Kong refranchising, McDonald's restaurant base is now 91% franchised and nearing management's 2018 target of 93%. Excluding refranchising gains, operating margins were 38.7%, and we believe McDonald's remains on track for mid-40s operating margins by 2019. While delivery and mobile order and pay investments will weigh on U.S. restaurant margins in the near future, we expect this to be more than offset by the impact of refranchising and operating leverage from the aforementioned top-line layers.
We're not planning material changes to our $165 fair value estimate. While shares strike us as fairly valued, we don't see many downside catalysts on the horizon, with velocity accelerators becoming more significant contributors and cash return levels set to accelerate as refranchising/EOTF efforts taper.
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