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

Zacks Equity Research

McDonald's (MCD) closed at $207.22 in the latest trading session, marking a -0.56% move from the prior day. This change lagged the S&P 500's daily gain of 1%.

Coming into today, shares of the world's biggest hamburger chain had gained 0.47% in the past month. In that same time, the Retail-Wholesale sector lost 2.76%, while the S&P 500 lost 1.22%.

Investors will be hoping for strength from MCD as it approaches its next earnings release, which is expected to be October 22, 2019. On that day, MCD is projected to report earnings of $2.21 per share, which would represent year-over-year growth of 5.24%. Our most recent consensus estimate is calling for quarterly revenue of $5.49 billion, up 2.17% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $7.99 per share and revenue of $21.10 billion, which would represent changes of +1.14% and +0.36%, respectively, from the prior year.

Any recent changes to analyst estimates for MCD should also be noted by investors. Recent revisions tend to reflect the latest near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

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 0.15% lower within the past month. MCD is currently sporting a Zacks Rank of #3 (Hold).

In terms of valuation, MCD is currently trading at a Forward P/E ratio of 26.07. Its industry sports an average Forward P/E of 21.84, so we one might conclude that MCD is trading at a premium comparatively.

Also, we should mention that MCD has a PEG ratio of 3.1. 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 2.04 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 111, which puts it in the top 44% 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.

Make sure to utilize Zacks. Com to follow all of these stock-moving metrics, and more, in the coming trading sessions.

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