McDonald’s Corporation’s (NYSE: MCD) decision to try to get a bigger piece of the huge fast food chicken market is a brilliant move that should lift MCD stock. The fast food giant’s efforts to make its Happy Meals healthier are also positive, as they will improve the company’s image.
Given these upcoming upbeat catalysts, investors should buy MCD at current levels .
Earlier this week, Bloomberg reported that McDonald’s is looking to become “a credible chicken player …by being more like Chick-fil-A Inc.” Ultimately, McDonald’s goal is to become “a top-tier chicken restaurant,” the news service stated.
Bloomberg also pointed out that Americans’ consumption of chicken is rising, with total chicken consumption now nearly 1.5 times that of beef.
I believe that the trend will accelerate greatly in coming years. Beef consumption has a more negative impact on the environment than chicken. Since millennials care a great deal about their environmental footprints, they are probably going to continue eating much more chicken than beef. It’s good that McDonald’s is migrating to chicken. The redued reliance on beef should help MCD stock.
MCD Stock and Competitive Data
Financial data indicates that McDonald’s can significantly increase its top and bottom lines by gaining market share in the chicken category. Specifically, Chick-Fil-A generates more revenue per restaurant than any other company in the U.S.
Of course, if McDonald’s can take some share from Chick-Fil-A, the results posted by the Golden Arches giant will significantly improve, pushing MCD stock up further. McDonald’s can also take share from Yum Brands’ Inc (NYSE: YUM) Kentucky Fried Chicken, whose U.S. restaurants generated an average of over $1 million of sales in 2016.
KFC’s worldwide revenue growth is also growing very quickly, as its same-store sales surged 4% year-over-year last quarter and its system sales jumped 8%.
The decision by MCD to make its Happy Meals healthier is also a positive move that should help the company. By the end of 2022, at least half of all Happy Meals will have less than 600 calories, USA Today reported. “By June, all Happy Meals in the U.S. will…have no more than 600 calories, with 10% of those calories coming from saturated fat and 10% from added sugar.”
McDonald’s is accomplishing these milestones by lowering the number of fries in Happy Meals that come with Chicken McNuggets, reducing the amount of sugar in its chocolate milk, adding bottled water as a beverage option to Happy Meals, and removing cheese from Happy Meal hamburgers.
MCD appears to have received many billions of dollars of free, positive publicity from this move, as the news has been covered extensively in many media outlets. Additionally, by taking this step, the fast food giant will gain the appreciation of many parents who will see that the company is offering healthier food to their children.
The Bottom Line on MCD Stock
Finally, the publicity could cause some consumers to realize that the company has made its menu healthier in other ways. For example, it has eliminated antibiotics from all of its chicken, and all or nearly all of its restaurants now offer a (delicious) fruit and yogurt parfait cup.
McDonald’s decision to emphasize and improve its chicken offerings is a great strategic move, and its Happy Meal innovation is a masterful p.r. decision. The company should continue to fire on all cylinders going forward, propelling MCD stock higher.
As of this writing, Larry Ramer did not own any shares of any of the companies named.
