Buy McDonald's as a safe haven in case of market downturn, says analyst

  • "If we do go into some sort of cyclical downturn, this is one of the names to be in," says Morningstar's R.J. Hottovy.
  • McDonald's shares rally after the chain reports better-than-expected earnings.
  • McDonald's planned 15 percent dividend increase is another reason that nvestors should "keep it on the radar screen," says Hottovy.

Investors looking for a stock that will retain its value during turbulent market conditions should turn to McDonald's, according to Morningstar analyst R.J. Hottovy.

"If we do go into some sort of cyclical downturn, this is one of the names to be in," Hottovy said in an interview with CNBC's "Squawk Box" on Tuesday. "This name generally holds up pretty well."

McDonald's shares rallied 5.7 percent by Tuesday afternoon after the fast food giant reported better-than-expected earnings for the third quarter.

Here's what the company reported compared with Wall Street's expectations, based on a survey of analysts by Refinitiv:

  • Adjusted earnings: $2.10 per share vs. $1.99 per share
  • Revenue: $5.37 billion vs. $5.32 billion
  • Same-store sales: 2.4 percent growth in the U.S., in line with StreetAccount estimates.

Along with its strong earnings report, McDonald's planned 15 percent dividend increase is another reason investors should "keep it on the radar screen," said Hottovy.

McDonald's also reported strong international same-store sales growth.

The company is aiming to remodel its domestic stores to match the modernized counterparts abroad, where same-store sales grew by a stronger-than-expected 5.4 percent in the quarter. Although stores undergoing construction typically see a decline in sales, the remodeling efforts will pay off, said David Palmer, an analyst at RBC Capital Markets.

The company should present "a nice earnings and free cash flow story into 2020" once the renovations are complete, he said Tuesday on "Squawk on the Street."

New technologies that will be added as part of renovations, such as self-serve ordering kiosks, allow McDonald's to "remove some of the front-of-house labor" in its restaurants, which could help cut costs in an increasingly tight labor market, BTIG analyst Peter Saleh said on CNBC's "Power Lunch."

McDonald's post-earnings stock jump was one of the few bright spots Tuesday in the Dow Jones Industrial Average, which was more than 200 points lower Tuesday afternoon.

–CNBC's Sarah Whitten contributed reporting.