McDonald's new burger line and drink promotions are a big hit with consumers, according to one Wall Street firm.
Credit Suisse reiterated its outperform rating on the restaurant chain, saying its improving sales trends will drive its shares higher.
"We caught up with a handful of our MCD US franchisee contacts last week. Franchisees reported continued SSS [same-store sales] strength in July and Aug., with solid momentum through the qtr," analyst Jason West wrote in a note to clients Tuesday. "Franchisees also see investments made in food quality and brand image over the past ~2 years as supporting strong SSS trends."
West reaffirmed his $170 price target for the restaurant chain, representing 6 percent upside from Friday's close.
He said the better-than-expected sales checks were due to a strong reception to beverage promotions and the "Signature Crafted" burger line launched in May.
As a result, the analyst raised his third-quarter same-store sales growth estimate to 3.5 percent from 3.0 percent.
We "see room for upside to our new est. should momentum build further through Sep. 2017," he wrote. "Top-line strength should keep [the] stock grinding higher."
West's restaurant contacts are also optimistic over McDonald's new chicken tenders launch later this year and the "fresh beef" quarter pounder coming in 2018.
"Longer term, franchisees were positive on sales tailwind from remodels, fresh beef launch in mid-2018 and increased focus on national value platforms," the note said.