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

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  • MCD
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McDonald's (MCD) closed the most recent trading day at $249.33, moving +0.21% from the previous trading session. The stock outpaced the S&P 500's daily loss of 0.85%. Elsewhere, the Dow lost 0.17%, while the tech-heavy Nasdaq lost 0.05%.

Coming into today, shares of the world's biggest hamburger chain had lost 1.84% in the past month. In that same time, the Retail-Wholesale sector lost 2.48%, while the S&P 500 lost 0.97%.

Investors will be hoping for strength from McDonald's as it approaches its next earnings release. The company is expected to report EPS of $2.32, up 36.47% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $6.03 billion, up 13.47% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $9.34 per share and revenue of $23.22 billion. These totals would mark changes of +54.38% and +20.9%, respectively, from last year.

It is also important to note the recent changes to analyst estimates for McDonald's. Recent revisions tend to reflect the latest near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

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 0.06% higher within the past month. McDonald's is currently sporting a Zacks Rank of #3 (Hold).

Digging into valuation, McDonald's currently has a Forward P/E ratio of 26.63. For comparison, its industry has an average Forward P/E of 22.33, which means McDonald's is trading at a premium to the group.

Meanwhile, MCD's PEG ratio is currently 2.23. 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. The Retail - Restaurants was holding an average PEG ratio of 2.12 at yesterday's closing price.

The Retail - Restaurants industry is part of the Retail-Wholesale sector. This group has a Zacks Industry Rank of 227, putting it in the bottom 11% 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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