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

Zacks Equity Research
·3 mins read

McDonald's (MCD) closed at $226.07 in the latest trading session, marking a +1.53% move from the prior day. This move lagged the S&P 500's daily gain of 1.8%. At the same time, the Dow added 1.68%, and the tech-heavy Nasdaq gained 2.33%.

Prior to today's trading, shares of the world's biggest hamburger chain had gained 4.15% over the past month. This has outpaced the Retail-Wholesale sector's loss of 6% and the S&P 500's loss of 6.31% in that time.

Wall Street will be looking for positivity from MCD as it approaches its next earnings report date. In that report, analysts expect MCD to post earnings of $1.82 per share. This would mark a year-over-year decline of 13.74%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $5.24 billion, down 3.43% from the year-ago period.

MCD's full-year Zacks Consensus Estimates are calling for earnings of $5.86 per share and revenue of $19.05 billion. These results would represent year-over-year changes of -25.26% and -9.63%, respectively.

Investors should also note any recent changes to analyst estimates for MCD. These revisions typically reflect the latest short-term business trends, which can change frequently. 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.

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. The Zacks Consensus EPS estimate has moved 0.36% higher within the past month. MCD is holding a Zacks Rank of #3 (Hold) right now.

Valuation is also important, so investors should note that MCD has a Forward P/E ratio of 38 right now. This represents a premium compared to its industry's average Forward P/E of 31.86.

Also, we should mention that MCD has a PEG ratio of 5.5. 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. Retail - Restaurants stocks are, on average, holding a PEG ratio of 3.96 based on yesterday's closing prices.

The Retail - Restaurants industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 55, which puts it in the top 22% 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.

To follow MCD in the coming trading sessions, be sure to utilize Zacks.com.


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Zacks Investment Research