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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 the most recent trading day at $220.26, moving +0.95% from the previous trading session. This change lagged the S&P 500's 1.61% gain on the day. Meanwhile, the Dow gained 1.51%, and the Nasdaq, a tech-heavy index, added 1.87%.

Coming into today, shares of the world's biggest hamburger chain had gained 2.82% in the past month. In that same time, the Retail-Wholesale sector lost 4.77%, while the S&P 500 lost 4.08%.

Investors will be hoping for strength from MCD as it approaches its next earnings release. The company is expected to report EPS of $1.82, down 13.74% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $5.24 billion, down 3.43% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $5.86 per share and revenue of $19.05 billion, which would represent changes of -25.26% and -9.63%, 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 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.

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. Within the past 30 days, our consensus EPS projection has moved 0.36% higher. MCD is currently sporting a Zacks Rank of #3 (Hold).

Digging into valuation, MCD currently has a Forward P/E ratio of 37.24. For comparison, its industry has an average Forward P/E of 33.34, which means MCD is trading at a premium to the group.

Also, we should mention that MCD has a PEG ratio of 4.85. 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 3.9 at yesterday's closing price.

The Retail - Restaurants industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 74, putting it in the top 30% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual 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.

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

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Zacks Investment Research