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McDonald's (MCD) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research
Principal Financial (PFG) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

McDonald's (MCD) closed at $189.87 in the latest trading session, marking a +0.81% move from the prior day. This move outpaced the S&P 500's daily gain of 0.21%. Meanwhile, the Dow gained 0.64%, and the Nasdaq, a tech-heavy index, lost 0.05%.

Prior to today's trading, shares of the world's biggest hamburger chain had gained 3.47% over the past month. This has outpaced the Retail-Wholesale sector's gain of 2.34% and the S&P 500's gain of 2.57% in that time.

Wall Street will be looking for positivity from MCD as it approaches its next earnings report date. This is expected to be April 30, 2019. In that report, analysts expect MCD to post earnings of $1.75 per share. This would mark a year-over-year decline of 2.23%. Our most recent consensus estimate is calling for quarterly revenue of $4.95 billion, down 3.63% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $8.12 per share and revenue of $20.91 billion. These totals would mark changes of +2.78% and -0.55%, respectively, from last year.

Investors might also notice 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.

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 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 0.39% lower. MCD is holding a Zacks Rank of #4 (Sell) right now.

Valuation is also important, so investors should note that MCD has a Forward P/E ratio of 23.19 right now. This valuation marks a premium compared to its industry's average Forward P/E of 21.19.

Meanwhile, MCD's PEG ratio is currently 2.64. 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 industry currently had an average PEG ratio of 2.07 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 101, which puts it in the top 40% 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.

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


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