McDonald’s is expected to keep pushing value deals after seeing U.S. traffic improvement

McDonald’s Corporation (NYSE:MCD) is expected to keep pulling promotional levers in Q4 after seeing some success in the U.S. during Q3 with traffic and comparable sales trends.

The latest round of franchise checks by BTIG looked positive for McDonald’s (MCD). Analyst Peter Saleh said several operators noted comparable sales moved into positive territory in August and September, which bodes well for the restaurant company’s Q3 earnings report. The franchise checks indicated that the $5 Meal Deal specifically is driving traffic improvements and attracting lower-income guests back to McDonald’s.

Saleh said the $5 Meal Deal has always been considered a bridge to a new national value platform, though that bridge continues to get longer. Franchisees have maintained that the deal was too narrow and the price point not sustainable nationally to continue offering, but that the system also does not have any compelling alternatives. “A new national value platform was supposed to be ready for early September, this didn’t happen, so the $5 Deal was extended to year-end while McDonald’s continues to test different platforms ahead of a planned launch early next year,” updated Saleh.

Notably, McDonald’s (MCD) plans to launch the Chicken Big Mac in early October, Spicy McNuggets later in the month, the Halloween Happy Meal late in the month, and the return of the McRib in most markets in December.

McDonald’s (MCD) is seen having an advantage if the restaurant industry can’t match its new value offerings. “We believe higher valuation premium relative to S&P and peers is warranted given its clear scale advantage that will allow it to outcompete peers and move into an even stronger position within the fast food industry,” highlighted Goldman Sachs analyst Christine Cho.

Shares of McDonald’s (MCD) cooled off on Tuesday, with a 0.3% dip that took them to $303.50. The restaurant stock is still up more than 20% from its low point in July. McDonald’s (MCD) is due to step into the earnings confessional on October 29/