Why McDonald's Is Still a Buy After Rolling Back DEI Initiatives
McDonald's stock is moving higher Tuesday after the fast food giant said it is scrapping certain DEI goals. Here's what you need to know.
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McDonald's (MCD) is slightly higher in Tuesday's session after the world's largest foodservice retailer became the latest company to say it is ending certain diversity, equity and inclusion (DEI) goals.
The initiatives McDonald's is ending include representation goals in leadership positions and a pledge that encouraged suppliers to implement DEI strategies and increase minority representation, the company said in a press release.
To come to this decision, McDonald's said it reviewed its inclusion efforts, consulted shareholders, evaluated legal shifts such as the Supreme Court ruling in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College and compared its approach to other companies.
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Walmart (WMT), Deere (DE) and Ford Motor (F) are just a few firms that have recently done away with DEI initiatives.
"We will continue to drive business results through all three legs of the McDonald's stool, specifically with our people practices, by fueling economic impact and innovation through our robust supply chain, and by building a franchisee pipeline that thrives in the communities we serve and fuels our growth," the company said in a statement.
Is McDonald's stock a buy, sell or hold?
McDonald's boasts a six-month total return (price change plus dividends) of nearly 18% and analysts think Kiplinger Dividend 15 stock has more room to run.
According to S&P Global Market Intelligence, the average analyst target price for the Dow Jones stock is $322.20, representing implied upside of nearly 10% to current levels. Additionally, the consensus recommendation is Buy.
Financial services firm Jefferies is one of the more bullish outfits on the blue chip stock with a Buy rating and $345 price target.
"(Our) top pick is MCD, where we see accelerating share wins in the U.S. through 2025 and beyond," wrote Jefferies analyst Andy Barish in a December 16 note. He adds that this will be "driven by low price points and bundle value offerings" as well as "momentum in digital, loyalty, delivery, core menu focus along with limited time offers, and a strong brand and marketing platform.
Over the long term, Barish sees opportunities in margin expansion, free cash flow conversion and accelerating unit growth, all of which should drive MCD stock higher.
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