McDonald’s Faces Challenges Amidst Market Competition and Sales Decline
With a market cap of $212.1 billion, McDonald’s Corporation (MCD) stands as a dominant force in the fast-food sector, operating and franchising its restaurants not just in the United States, but around the globe. Headquartered in Chicago, Illinois, McDonald’s delivers a wide array of food and beverages, generating income from both company-operated outlets and franchise fees.
Companies valued at $200 billion and above are classified as “mega-cap” stocks, a category where McDonald’s clearly belongs. The restaurant giant is known for its consistent global branding while also adapting its offerings. Classic choices like the Big Mac and French fries are complemented by localized menu items that cater to regional preferences, supported by an effective franchising model and strategic real estate management.
Despite its notable stature, McDonald’s recently saw its shares retreat by 8.1% from a 52-week high of $317.90 achieved on October 21. During the past three months, shares of McDonald’s have edged up 1.2%, falling short of the Consumer Discretionary Select Sector SPDR Fund’s (XLY) impressive 19.9% increase during the same period.
Looking at a longer timeline, MCD stock is down 1.4% year-to-date, in contrast to XLY’s robust 25.4% rise. Over the past year, shares of McDonald’s have only increased by 2.2%, while XLY delivered a notable 31.1% return.
Notably, MCD stock has been trading above its 50-day moving average since late July, with some recent volatility. Additionally, the stock has consistently remained above its 200-day moving average since mid-August.
In its latest quarterly report, McDonald’s showcased a strong Q3 performance with an adjusted EPS of $3.23 and revenue of $6.9 billion, surpassing expectations. Nonetheless, shares dipped slightly on October 29 after a 1.5% decline in global comparable sales, including a 2.1% drop in the International Operated Markets segment. Analysts observed that growth in the U.S. was primarily due to larger average checks rather than an influx of customers, hinting at potential weak demand. Concerns also arose over underwhelming performance in significant international markets such as the Middle East and China, which could affect global recovery trends.
Looking forward, on November 22, the company unveiled the nationwide launch of its McValue™ platform, slated for introduction on January 7, 2025. This new initiative promises customizable savings like the $5 Meal Deal and the Buy One, Add One for $1 offer, providing customers with enhanced affordability options across breakfast, lunch, and dinner, plus exclusive in-app and local discounts.
In contrast, competitor Yum! Brands, Inc. (YUM) is currently outperforming McDonald’s. For instance, shares of Conagra Brands have gained 8.4% over the last year and 5.6% year-to-date.
Despite McDonald’s current stock struggles, analysts maintain a moderately positive outlook. The stock holds a consensus rating of “Moderate Buy” from the 34 analysts tracking it, and as noted, MCD is trading below the mean price target of $323.55.
On the date of publication, Sohini Mondal did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. To review the Barchart Disclosure Policy, click here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
