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Can McDonald’s Stock Continue Its Upward Momentum?

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Stock performance

At the end of October 5, McDonald’s (MCD) was trading at $166.57, which represents a 4.8% rise since the announcement of its second-quarter earnings on July 26.

In the quarter that ended on June 30, McDonald’s had an adjusted EPS of $1.99 on revenues of $5.35 billion, outperforming analysts’ EPS estimate of $1.92 and revenue estimate of $5.32 billion.

The company’s overall SSSG (same-store sales growth) of 4% outperformed analysts’ expectation of 3.5%. However, its SSSG in the United States was 2.6%, falling short of analysts’ expectation of 3%. The stock fell to a low of $153.13 on August 2.

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On August 14, MCD management announced that it will be investing $6 billion in the construction and modernization of most of its restaurants by 2020. On September 26, it announced that it would not use artificial ingredients for its classic burgers at any of its 14,000 US restaurants. The announcements seem to have increased investor confidence, leading to a rise in MCD stock.

Year-to-date performance

Despite a recent surge in the stock, McDonald’s is still trading 3.2% lower YTD (year-to-date). Wendy’s (WEN) has returned 5.1% YTD, while Starbucks (SBUX) and Jack in the Box (JACK) have fallen 2.9% and 14.9%, respectively, YTD.

The price of the broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), which has invested 8.1% of its holdings in restaurant and travel companies, has returned 13.7% YTD.

Series overview

In this series, we’ll look at analysts’ revenue and EPS estimates for McDonald’s for the next four quarters. We’ll also look at management’s guidance for 2018. Finally, we’ll look at analysts’ recommendations and the company’s valuation multiple.

Let’s start with analysts’ revenue expectations for McDonald’s.

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