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A recession could mean big business for McDonald’s: strategist

Kenneth Underwood
Senior Producer

McDonald’s (MCD) shares closed down over 5% Tuesday after the fast-food giant’s third-quarter earnings missed estimates for the first time in two years.

Despite same-store sales growth internationally, McDonald’s U.S. growth missed expectation. So, what what could bring customers back? A recession.

“I think that companies like McDonald's, stocks like McDonald's, are somewhat recession proof,” Bruderman Asset Management Chief Market Strategist Oliver Pursche told Yahoo Finance’s On the Move. “As we talk about a global slowdown, as we talk about a slowdown in the US economy, those lower priced item menus tend to do well for them.”

A McDonald's customer shows her french fries box at the fast-food chain McDonald's in New York, U.S., October 22, 2019. REUTERS/Shannon Stapleton

Fast-food war

The rough quarter for McDonald’s comes as competition intensifies in the fast-food space, with brands like Wendy’s (WEN) turning to things like breakfast to try and lure customers.

“Wendy's is doing a great job at reinventing itself and bringing up sales there. So the competition is heating up,” says Pursche. “At some point or another, any smart investor or portfolio manager is going to have to look at that and see whether that change is a thesis of why you own the stock.”

McDonald’s also faced competition from the Popeyes Chicken Sandwich craze and Burger King’s (QSRmove into meatless with the Impossible Whopper, something McDonald’s has yet to do in the U.S.

Pursche says, it’s the latter they should be worried about. “A Popeye's sandwich is a short term phenomena that's yet to be proven whether that's an impact in consumer behavior. The Meatless Burger is clearly the beginning of a change in taste and consumer behavior. And so that can have an impact. So that part we would be much more concerned about than say, a promotion, that gets a lot of press.”

Kenneth Underwood is a senior producer for Yahoo Finance. Follow him on Twitter @TheKennyU.

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