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

Zacks Equity Research
Safety, Income and Growth (SAFE) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

In the latest trading session, McDonald's (MCD) closed at $195.26, marking a +0.69% move from the previous day. This change lagged the S&P 500's 0.88% gain on the day. Elsewhere, the Dow gained 0.55%, while the tech-heavy Nasdaq added 1.32%.

Heading into today, shares of the world's biggest hamburger chain had gained 4.42% over the past month, lagging the Retail-Wholesale sector's gain of 4.72% and outpacing the S&P 500's gain of 3.96% in that time.

Investors will be hoping for strength from MCD as it approaches its next earnings release, which is expected to be April 30, 2019. In that report, analysts expect MCD to post earnings of $1.74 per share. This would mark a year-over-year decline of 2.79%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $4.95 billion, down 3.77% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $8.11 per share and revenue of $20.79 billion. These totals would mark changes of +2.66% and -1.12%, respectively, from last year.

Investors should also note any recent changes to analyst estimates for MCD. These revisions help to show the ever-changing nature of near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. 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 0.34% lower within the past month. MCD is currently sporting a Zacks Rank of #4 (Sell).

Valuation is also important, so investors should note that MCD has a Forward P/E ratio of 23.92 right now. Its industry sports an average Forward P/E of 21.15, so we one might conclude that MCD is trading at a premium comparatively.

Meanwhile, MCD's PEG ratio is currently 2.72. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. MCD's industry had an average PEG ratio of 2.06 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 170, which puts it in the bottom 34% 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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