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McDonald's (MCD) Gains But Lags Market: What You Should Know

Zacks Equity Research

McDonald's (MCD) closed the most recent trading day at $212.63, moving +0.29% from the previous trading session. The stock lagged the S&P 500's daily gain of 0.62%. Meanwhile, the Dow gained 0.61%, and the Nasdaq, a tech-heavy index, added 1.05%.

Coming into today, shares of the world's biggest hamburger chain had lost 1.87% in the past month. In that same time, the Retail-Wholesale sector gained 2.71%, while the S&P 500 gained 3.85%.

MCD will be looking to display strength as it nears its next earnings release. On that day, MCD is projected to report earnings of $2.22 per share, which would represent year-over-year growth of 5.71%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $5.50 billion, up 2.41% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $8.01 per share and revenue of $21.13 billion, which would represent changes of +1.39% and +0.5%, respectively, from the prior year.

Investors might also notice recent changes to analyst estimates for MCD. These revisions help to show the ever-changing nature of near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. MCD is holding a Zacks Rank of #3 (Hold) right now.

Investors should also note MCD's current valuation metrics, including its Forward P/E ratio of 26.48. This valuation marks a premium compared to its industry's average Forward P/E of 23.8.

Also, we should mention that MCD has a PEG ratio of 3.15. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. The Retail - Restaurants industry currently had an average PEG ratio of 2.23 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 147, which puts it in the bottom 43% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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