What’s Happening With McDonald’s Stock?
McDonald’s (NYSE: MCD) stock is up 5% since the beginning of 2024, compared to a 27% return of the S&P 500 over the same period. MCD’s peer Chipotle Mexican Grill (NYSE: CMG) stock fell 4% during the same period. In contrast, another competitor, Starbucks stock (NASDAQ: SBUX), has increased about 22% over the same period. Separately, CROX reports earnings tomorrow. Will the stock pop on the news? See How Might Crocs Stock React To Upcoming Earnings?
So what’s happening with MCD stock?
McDonald’s reported Q4 earnings on February 10, falling short of analyst expectations with EPS of $2.80 (vs. $2.84 forecast, flat year-over-year (y-o-y)) and revenue of $6.39 billion (vs. $6.45 billion forecast, also flat y-o-y). The stock market reacted unexpectedly, with the company’s shares increasing 4.8% to $308.23 in pre-market trading (as of writing) despite the earnings miss. Q4 results were underwhelming with rising costs outpacing revenue growth, largely in line with the company’s previous quarters’ performance in 2024. McDonald’s reported a decrease in global comparable sales by 0.1% for the full year 2024, although Q4 saw a modest increase of 0.4%. However, U.S. same-store sales in Q4 were down 1.4% y-o-y, as the E. coli outbreak offset momentum in late October. On the other hand, International-owned stores saw positive same-store sales growth in the Middle East, attributed to the lapse of the impact of the Israeli conflict, plus growth in Japan and encouraging signs of stabilization in China. Separately, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
McDonald’s is poised to focus on value and affordability in 2025, aiming to recapture market share among low-income consumers through menu innovation and strategic marketing initiatives. To drive growth, the company introduced its McValue menu platform, featuring new offerings such as chicken tenders and snack wraps, and bringing back the Chicken Big Mac for limited-time offers. Although the company anticipates a gradual recovery, with a full business rebound only expected to begin in the second quarter of 2025, it remains committed to expanding its global footprint with approximately 2,200 new restaurant openings, including 25% in mature markets of the U.S. The company also aims to reach 50,000 restaurants by the end of 2027 and increase its active digital users to 250 million. Looking ahead, McDonald’s is targeting an operating margin in the mid-to-high 40% range for 2025. For context, the company’s operating margins fell to 45.2% in FY 2024 compared to 45.7% in FY 2023.
McDonald’s value meal strategy has shown initial promise, with a modest increase in comparable guest counts in Q4. However, this approach also presents a challenge, as it compresses gross margins. Looking ahead, the company’s aggressive expansion into digital and home-delivery channels, its resilience in challenging economic conditions, and its ability to adapt menus to local tastes position it for long-term growth. We forecast McDonald’s revenues to be $26.7 billion for the fiscal year 2025, up 3% y-o-y. Given the changes to our revenues and earnings forecast, we have revised our McDonald’s Valuation to $313 per share, based on $12.40 expected EPS and a 25.3x P/E multiple for the fiscal year 2025 – almost in line with the current market price.
Systematic Strategies & Rules-Based Wealth Management
Trefis runs systematic portfolio strategies that incorporate risk control through a combination of high-quality picks and active hedges. We’ve partnered with Empirical Asset Management, a rules-based wealth manager, to make these strategies available to investors. If you’re interested in learning more about Trefis strategies or Empirical check out this link.