Is McDonald’s Corporation (MCD) a Buy?

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Fast food giant McDonald’s Corporation (NYSE:MCD) almost needs no introduction. Those golden arches speak for themselves, and the company holds one of the most universally known and most valuable brands in the world.

After a disappointing stock price performance in 2012, McDonald’s Corporation (NYSE:MCD) is back to its winning ways, having gained 11% so far this year. Is there more upside potential for investors to savor?

McDonald's Corporation (NYSE:MCD)

Resilient performance in a difficult environment

McDonald’s same-store sales have seen some volatility in recent months, particularly in the U.S. where the payroll tax hike and frustratingly slow improvement in the labor market have served as body blows to the company’s key customer base.

Add to that the ongoing fiscal calamity in Europe, and you’d think McDonald’s Corporation (NYSE:MCD) was a stock worth shorting. Indeed, the company’s global same-store sales declined in January (by 1.9%), in February (by 1.5%), and again in April (by 0.6%).

However, the company got its financial house in order, reporting global comparable sales growth of 2.6% in May.

Close rival Burger King Worldwide Inc (NYSE:BKW) has had its own fair share of struggles in recent quarters. The company’s full-year 2012 sales dropped 15%.

The disappointing performance extended into the first quarter of the current fiscal year. Total revenue fell a massive 42% versus the same quarter the year prior.

On the plus side, the company has increased its dividend for two consecutive quarters. That being said, the stock yields just 1.1% at recent prices.

International expansion is a key tailwind

Investors needn’t concern themselves about McDonald’s Corporation (NYSE:MCD)’ sagging same-store sales, because there’s still plenty of room for growth in the form of international expansion. McDonald’s has identified new avenues for growth all across the globe, particularly in the emerging markets, where expanding middle classes mean millions of potential new customers.

In that vein, I’d point investors to the company’s plans for China. McDonald’s has put huge efforts into developing its operations there. McDonald’s Corporation (NYSE:MCD) is currently executing on its plan to open 225 to 250 new restaurants every year until it reaches its stated goal of 2,000 restaurants in China by the end of this year.

Moreover, the company has now targeted growth through an additional member nation of the BRIC countries: Russia. McDonald’s has 357 restaurants in more than 85 Russian cities, with plans to open at least 150 self-operated restaurants in Russia over the next three years.

This is one key advantage I believe McDonald’s Corporation (NYSE:MCD) has over smaller rival The Wendy’s Co (NASDAQ:WEN), because The Wendy’s Co (NASDAQ:WEN) does not yet have significant international operations outside of North America. At the end of 2012, The Wendy’s Co (NASDAQ:WEN) had 374 franchised restaurants in 26 countries and territories outside of North America. That represents just 5% of the company’s total restaurant system.

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