Analysts Are Bullish on McDonald's, Raising Price Targets and Forecasts – Should You Consider Buying MCD Shares Now?

Analysts Boost Price Targets for McDonald's (MCD) Following Strong Earnings

Recent robust earnings from McDonald's Corporation (MCD) have prompted analysts to increase their price targets for the stock. MCD shares have experienced significant momentum in the past month. For investors seeking a more cautious approach, selling short-term put options with a one-month expiration may be a viable strategy.

On Friday, February 13, MCD closed at $327.58, slightly below its February 12 high of $332.08, which followed the February 11 earnings announcement. Despite this pullback, the stock has climbed 9.2% from its January 5 low of $299.86 and a subsequent dip to $302.84 on January 20. The question remains: can this upward trend continue? This analysis explores McDonald's valuation and its potential for further gains.

Additional Insights from Barchart

Healthy Free Cash Flow, Improving Margins

One of the key highlights from McDonald's latest earnings is the performance of its operating cash flow (OCF) and free cash flow (FCF), along with their respective margins as a percentage of revenue.

According to recent financial data and analysis, McDonald's saw its OCF and FCF margins improve in 2025, even as capital expenditures increased.

For instance, operating cash flow reached 39.2% of revenue, up from 36.5%, representing a 7.4% increase. This outpaced the 3.7% revenue growth to $26.9 billion in 2024—essentially doubling the rate of revenue expansion.

This improvement signals that McDonald's is becoming more effective at generating cash from its operations as sales grow, demonstrating strong operating leverage. If revenue continues to rise, OCF margins could climb even higher in the coming year.

Additionally, the company was able to allocate more funds to capital expenditures, which rose to 12.5% of sales from 10.7%. Despite this, FCF as a percentage of sales still increased to 26.7% from 25.7%.

This financial strength enables McDonald's to invest in growth while still producing higher free cash flow, supporting a higher valuation for the stock. Here’s how the numbers play out.

Updated Free Cash Flow Forecast

Previous articles published on Barchart in January, December, and November discussed McDonald's valuation ahead of earnings, with a price target of $371.30 based on a projected $9 billion in FCF for 2026—a 25% jump from 2025. This estimate assumed a 40% OCF margin and $3.2 billion in capital expenditures.

Given that McDonald's has already surpassed previous capex projections, it's time to update the FCF model using the latest results.

Key Forecast Assumptions

1. Revenue Outlook: Analysts now expect McDonald's to generate $28.61 billion in revenue for 2026, up from the $28.51 billion forecasted in November 2025. The 2027 estimate stands at $30.26 billion, suggesting a next-twelve-months (NTM) revenue of $28.95 billion, which is 7.68% higher than 2025.
2. Operating Cash Flow Margins: With OCF margins rising at twice the pace of revenue growth in 2025, a conservative estimate for the NTM OCF margin is 42%.
3. Capital Expenditures: Management anticipates capex between $3.7 billion and $3.9 billion this year. Given the company's history of exceeding guidance and its goal of reaching 50,000 stores by 2027, the NTM capex estimate is set at $4.0 billion.

Applying these assumptions:

• $28.95 billion NTM revenue × 0.42 = $12.159 billion in OCF
• $12.159 billion OCF – $4.0 billion capex = $8.159 billion in FCF

This updated FCF projection is lower than the previous target, but it may still justify a higher price target due to valuation multiples.

Valuation and Price Targets for MCD

FCF Yield Approach: Historically, a 3.4% FCF yield (or a 29.4x FCF multiple) has been used to value MCD. Currently, McDonald's market capitalization is $237.6 billion, with $7.2 billion in FCF, resulting in a 3.03% FCF yield. This equates to a 33.33x FCF multiple.

Multiplying the projected $8.159 billion in FCF by 33.33 yields an estimated market value of $271.94 billion, which is 14.45% above the current market cap. This translates to a price target of:

• $327.58 × 1.1445 = $374.92 per share (14.5% upside)

This target surpasses the previous $371.30 estimate, even with a lower FCF projection, due to the higher valuation multiple the market is assigning.

Dividend Yield Method: Another valuation method uses McDonald's average five-year dividend yield. The company has announced two quarterly dividends at a 5% higher rate, now paying $1.86 per quarter. Projecting forward, the annual dividend per share (DPS) is:

• $1.86 + $1.86 + $1.95 + $1.95 = $7.62

With an average yield of 2.25% over the past five years, the price target is:

• $7.62 ÷ 0.0225 = $338.57 per share (3.35% upside)

Analyst Consensus: Three major analyst surveys report the following average price targets:

• Yahoo! Finance: $340.03 (37 analysts)
• Barchart: $342.81
• AnaChart.com: $367.16 (22 analysts)

The average of these targets is $350.00 per share, indicating a 6.84% potential increase from the latest closing price.

Summary: Outlook for MCD Stock

Across these three valuation approaches, McDonald's stock appears to have an average upside potential of 8.0%, even after its recent gains:

• FCF Yield Target: $372.92 per share (+14.5%)
• Dividend Yield Target: $338.57 per share (+3.35%)
• Analyst Average Target: $350.00 per share (+6.84%)
• Overall Average Target: $353.83 per share (+8.0%)

However, this upside may take up to a year to materialize. For now, selling out-of-the-money put options with one-month expirations is suggested as a prudent strategy. Last month, the recommendation was to short the $295.00 put contract expiring February 20, which has performed well so far. Updates on new strategies will follow after this contract closes.