2019 ‘provides room for positive surprises’

Stephens upgraded McDonald’s shares to overweight from equal weight on Tuesday, saying the company’s lowered expectations for the year ahead “provides room for positive surprises.”

“We believe MCD’s core U.S. business is accelerating and set to show upside to consensus estimates for [first quarter 2019 and the full year,]” Stephens analyst Will Slabaugh said in a note to investors.

Wall Street lowered its estimates for 2019, Slabaugh said, due to an expectation that McDonald’s was trending lower after the company’s fourth-quarter U.S. same-store sales were weaker than expected. McDonald’s is no longer priced at a “defensive premium,” Slabaugh said.

McDonald’s shares opened as much as 0.5 percent higher but sold off throughout the day to end down 0.4 percent at $179.25 a share. Stephens has a $200 price target on McDonald’s.

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