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McDonald's (MCD) Dips More Than Broader Markets: What You Should Know

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Zacks Equity Research
·3 min read
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McDonald's (MCD) closed the most recent trading day at $165.35, moving -1.65% from the previous trading session. This change lagged the S&P 500's daily loss of 1.6%. Meanwhile, the Dow lost 1.84%, and the Nasdaq, a tech-heavy index, lost 0.95%.

Heading into today, shares of the world's biggest hamburger chain had lost 16.99% over the past month, lagging the Retail-Wholesale sector's loss of 6.56% and the S&P 500's loss of 10.82% in that time.

MCD will be looking to display strength as it nears its next earnings release. In that report, analysts expect MCD to post earnings of $1.96 per share. This would mark year-over-year growth of 13.95%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $5.06 billion, up 2.04% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $7.70 per share and revenue of $20.80 billion. These totals would mark changes of -1.79% and -1.33%, respectively, from last year.

Investors should also note any recent changes to analyst estimates for MCD. These recent revisions tend to reflect the evolving nature of short-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 9.83% lower. MCD is currently sporting a Zacks Rank of #4 (Sell).

Looking at its valuation, MCD is holding a Forward P/E ratio of 21.84. For comparison, its industry has an average Forward P/E of 15.74, which means MCD is trading at a premium to the group.

We can also see that MCD currently has a PEG ratio of 2.63. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Retail - Restaurants industry currently had an average PEG ratio of 1.94 as of yesterday's close.

The Retail - Restaurants industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 145, which puts it in the bottom 44% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.

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Zacks Investment Research