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

·3 min read

In the latest trading session, McDonald's (MCD) closed at $258.42, marking a +1.58% move from the previous day. This move lagged the S&P 500's daily gain of 1.83%. Elsewhere, the Dow gained 1.4%, while the tech-heavy Nasdaq added 0.09%.

Coming into today, shares of the world's biggest hamburger chain had lost 2.18% in the past month. In that same time, the Retail-Wholesale sector lost 5.2%, while the S&P 500 lost 5.51%.

Investors will be hoping for strength from McDonald's as it approaches its next earnings release. On that day, McDonald's is projected to report earnings of $2.59 per share, which would represent a year-over-year decline of 6.16%. Meanwhile, our latest consensus estimate is calling for revenue of $5.77 billion, down 6.98% from the prior-year quarter.

MCD's full-year Zacks Consensus Estimates are calling for earnings of $9.83 per share and revenue of $22.76 billion. These results would represent year-over-year changes of +5.93% and -1.99%, respectively.

Investors should also note any recent changes to analyst estimates for McDonald's. These revisions help to show the ever-changing nature of near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

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 0.24% higher within the past month. McDonald's is currently a Zacks Rank #3 (Hold).

Investors should also note McDonald's's current valuation metrics, including its Forward P/E ratio of 25.89. Its industry sports an average Forward P/E of 18.73, so we one might conclude that McDonald's is trading at a premium comparatively.

We can also see that MCD currently has a PEG ratio of 3.09. 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 was holding an average PEG ratio of 2.02 at yesterday's closing price.

The Retail - Restaurants industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 165, putting it in the bottom 35% 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.

Make sure to utilize Zacks.com to follow all of these stock-moving metrics, and more, in the coming trading sessions.


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