McDonald’s Stock Fell Due to Weak US Same-Store Sales Growth



Fourth-quarter performance

On January 30, McDonald’s (MCD) posted its fourth-quarter earnings. For the quarter ending December 31, the company posted an adjusted EPS of $1.97 on revenues of $5.16 billion. The company’s adjusted EPS grew 15.2% YoY (year-over-year), while its revenues declined 3.3%.

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Stock performance

During the quarter, McDonald’s beat analysts’ EPS and revenue expectations. The company’s global SSSG (same-store sales growth) of 4.4% outperformed analysts’ estimate of 3.9%. Despite posting strong fourth-quarter earnings, McDonald’s stock price fell due to the disappointing SSSG in the United States. The company’s SSSG in the United States was 2.3%, which fell short of analysts’ expectations of 2.4%. During the quarter, the traffic at McDonald’s restaurants in the United States declined. The company’s management blamed weakness in breakfast orders due to increased completion for the decline in traffic. On January 30, the company closed the day at $181.77, which represents a fall of 0.2% from the previous day’s closing price.

YTD performance

Despite the fall on January 30, McDonald’s was trading at 2.4% higher YTD (year-to-date). During the same period, Starbucks (SBUX), Wendy’s (WEN), and Jack in the Box (JACK) were trading at 5.8%, 11.1%, and 4.9%, respectively. The Consumer Discretionary Select Sector SPDR ETF (XLY), which has invested 8.5% of its holdings in restaurant and travel companies, has returned 8.9% YTD.

Series overview

In this series, we’ll discuss McDonald’s performance in the fourth quarter and compare it with analysts’ expectations. We’ll discuss management guidance and analysts’ expectations for 2019. We’ll also look at McDonald’s valuation multiple and analysts’ recommendations.

First, we’ll discuss McDonald’s fourth-quarter revenues.


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