2025-04-27 03:56Investment Rating - The report maintains a "Buy" rating for McDonald's and Domino's, while Starbucks and Shake Shack are rated as "Hold" [4][46]. Core Insights - The US restaurant sector outlook is tempered due to macroeconomic pressures, geopolitical uncertainty, and changing consumer behaviors, leading to a reduction in adjusted net earnings estimates by approximately 4% for 2025-26 [2][3]. - Same-store sales (SSS) are expected to decline by an average of 90 basis points year-over-year for 2025-26, primarily due to affordability issues affecting lower-income consumers, although there is some mitigation from higher-income diners trading down for value [2][3]. - The report emphasizes a preference for defensive, value-driven leaders with operational agility, highlighting McDonald's and Domino's as favorable investments due to their resilient franchise revenue streams and scalable operating models [3][25]. Summary by Company McDonald's - McDonald's is recognized for its resilient revenue stream, primarily from its 95% franchised model, and its broad geographic footprint, which provides diversification [7][25]. - The target price for McDonald's is revised to USD 343.00, reflecting a 10.2% upside potential [4][46]. - The company is expected to benefit from a multi-layered pricing strategy and digital transformation initiatives, which are anticipated to enhance operational efficiency and customer engagement [25][26]. Domino's - Domino's is noted for its strong franchise model and predictable income streams, allowing for continued investment in growth and innovation [7][30]. - The target price for Domino's is set at USD 540.00, indicating a 15.7% upside potential [4][46]. - The company is expected to leverage its marketing and distribution expertise to drive international growth, particularly in markets like China and India [30][31]. Starbucks - Starbucks is undergoing tactical changes aimed at long-term turnaround, with a focus on enhancing brand value and customer experience [7][37]. - The target price for Starbucks is lowered to USD 84.00, reflecting a 3.1% upside potential [4][46]. - Despite challenges, the company is expected to stabilize its same-store sales declines and improve customer engagement through operational initiatives [37][49]. Shake Shack - Shake Shack is recognized for its differentiated brand equity and commitment to high-quality menu items, with a solid development pipeline expected to drive growth [7][42]. - The target price for Shake Shack is revised to USD 89.00, indicating a 6.9% upside potential [4][46]. - The company faces headwinds from competition and macroeconomic concerns, but it is positioned to capitalize on its brand strength and market opportunities [42][50].