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McDonald's (MCD) Gains As Market Dips: What You Should Know

Zacks Equity Research
·3 mins read

McDonald's (MCD) closed at $227.35 in the latest trading session, marking a +0.55% move from the prior day. This move outpaced the S&P 500's daily loss of 0.63%. Elsewhere, the Dow lost 0.55%, while the tech-heavy Nasdaq lost 0.1%.

Coming into today, shares of the world's biggest hamburger chain had gained 2.52% in the past month. In that same time, the Retail-Wholesale sector gained 8.65%, while the S&P 500 gained 5.91%.

Wall Street will be looking for positivity from MCD as it approaches its next earnings report date. The company is expected to report EPS of $1.89, down 10.43% from the prior-year quarter. Meanwhile, our latest consensus estimate is calling for revenue of $5.30 billion, down 2.36% from the prior-year quarter.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $5.96 per share and revenue of $19.12 billion. These totals would mark changes of -23.98% and -9.27%, respectively, from last year.

Investors might also notice recent changes to analyst estimates for MCD. These revisions typically reflect the latest short-term business trends, which can change frequently. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 1.87% higher within the past month. MCD is currently a Zacks Rank #3 (Hold).

Digging into valuation, MCD currently has a Forward P/E ratio of 37.96. This valuation marks a premium compared to its industry's average Forward P/E of 31.18.

Investors should also note that MCD has a PEG ratio of 5.25 right now. 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 4.24 at yesterday's closing price.

The Retail - Restaurants industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 78, which puts it in the top 31% 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.

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


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