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

Zacks Equity Research

In the latest trading session, McDonald's (MCD) closed at $189.49, marking a +0.17% move from the previous day. This change lagged the S&P 500's 0.83% gain on the day. Meanwhile, the Dow gained 0.62%, and the Nasdaq, a tech-heavy index, added 1.43%.

Investors will be hoping for strength from MCD as it approaches its next earnings release. On that day, MCD is projected to report earnings of $0.65 per share, which would represent a year-over-year decline of 68.29%. Meanwhile, our latest consensus estimate is calling for revenue of $3.25 billion, down 39.07% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $5.40 per share and revenue of $17.52 billion, which would represent changes of -31.12% and -16.87%, respectively, from the prior year.

It is also important to note the 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. 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. The Zacks Consensus EPS estimate has moved 1.76% lower within the past month. MCD is holding a Zacks Rank of #3 (Hold) right now.

Digging into valuation, MCD currently has a Forward P/E ratio of 35.02. This valuation marks a discount compared to its industry's average Forward P/E of 41.29.

Investors should also note that MCD has a PEG ratio of 4.77 right now. 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 4.82 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 72, which puts it in the top 29% 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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