McDonald's Corporation (NYSE:MCD) Quarterly Earnings Preview

McDonald’s (NYSE:MCD) shares rose more than 4% intra-day today after delivering better-than-expected comparable sales in the fourth quarter, with strong performance in international markets helping to offset weaker demand in the U.S. Despite slowing growth, the fast-food giant exceeded analyst expectations, driven by strength in the Middle East and Japan.

For the quarter, global same-store sales increased by 0.4%, a sharp slowdown from the 3.4% growth seen a year earlier. While consumer demand in the U.S. remained sluggish, the figure outpaced analyst projections, which had anticipated a decline of nearly 1%.

Internationally, McDonald’s saw a notable boost from its licensed markets, where same-store sales jumped 4.1%, far exceeding both last year’s modest 0.7% growth and expectations for a decline. The company highlighted strong demand in key regions such as Japan and the Middle East, which contributed significantly to the segment’s outperformance.

In response to shifting consumer spending, McDonald’s has been rolling out more budget-friendly menu options to attract price-conscious customers. This comes as the company works to recover from an E. coli outbreak last year, which impacted customer traffic and confidence. Leadership has reaffirmed its commitment to food safety and rebuilding trust, emphasizing efforts to regain momentum in the U.S. market.

On the financial side, total revenue for the quarter dipped slightly by 0.3% year-over-year to $6.39 billion, missing analyst estimates of $6.45 billion. However, operating income rose 2.4% to $2.87 billion, reflecting operational resilience despite the sales slowdown.

As McDonald’s navigates a challenging consumer landscape, international strength and strategic pricing adjustments will be key to driving future growth.

Jefferies analysts reaffirmed their Buy rating on McDonald’s (NYSE:MCD) with a $345 price target, citing the fast-food giant as a top pick for 2025. The analysts highlighted the company’s strong positioning to gain market share and drive same-store sales (SSS) growth, even in a challenging quick-service restaurant (QSR) traffic environment.

McDonald’s momentum was expected to continue, supported by its focus on value-driven offerings, loyalty programs, and impactful marketing strategies. A new value-focused initiative planned for early January was anticipated to serve as a near-term catalyst. Additionally, the potential for modest reductions in general and administrative expenses and higher-than-expected unit growth could position McDonald’s for earnings outperformance in 2025 and 2026.

Over the long term, the analysts pointed to opportunities for margin expansion, robust free cash flow conversion, and strong total shareholder returns as key reasons for optimism. With its strategic initiatives and operational efficiency, McDonald’s appeared well-equipped to maintain leadership in the QSR sector and deliver sustainable growth.

• Brian Harbour from Morgan Stanley sets a new price target for McDonald's Corporation (NYSE:MCD) at $340, indicating an 8.51% potential increase.
• Wall Street analysts predict a potential rally of around 13% for McDonald's stock, reflecting a broader positive sentiment.
• McDonald's trading volume on the New York Stock Exchange shows strong investor interest, with a significant market capitalization of approximately $224.77 billion.

McDonald's Corporation (NYSE:MCD) is a global fast-food giant known for its iconic golden arches and a menu that includes burgers, fries, and breakfast items. The company operates in over 100 countries, serving millions of customers daily. McDonald's faces competition from other fast-food chains like Burger King and Wendy's, but it remains a leader in the industry.

On October 15, 2024, Brian Harbour from Morgan Stanley set a new price target for McDonald's Corporation (NYSE:MCD) at $340. At the time, the stock was priced at $313.34, indicating an 8.51% potential increase. This target reflects optimism about McDonald's future performance and aligns with a broader positive sentiment among analysts.

Analysts on Wall Street have adjusted their outlook for McDonald's, with some predicting a potential rally of around 13%. This change is part of a broader review of top market names, where analysts have updated their ratings. The current stock price of $313.34 reflects a 1.13% increase, or $3.50, from previous levels.

Today, McDonald's stock traded between $311.01 and $315.36, with the latter marking its highest price over the past year. The lowest price in the past year was $243.53. McDonald's has a market capitalization of approximately $224.77 billion, indicating its significant presence in the market.

The trading volume for McDonald's on the New York Stock Exchange is 2,609,818 shares. This level of activity suggests strong investor interest, possibly influenced by the recent analyst updates and the new price target set by Morgan Stanley.

Loop Capital analysts reaffirmed a Buy rating on McDonald's (NYSE:MCD), maintaining a price target of $342 on the stock.

The analysts’ optimism follows McDonald’s decision to extend its popular $5 Meal Deal through the end of the year, rather than launching a new everyday value platform as originally planned. According to feedback from franchisee sources, this move is seen as a positive development for the broader quick-service restaurant industry. By opting to continue the $5 Meal Deal, McDonald's has alleviated concerns among competitors like Burger King and Wendy’s, who were wary of an aggressive price competition heading into the holiday season.

This decision reduces the likelihood of a value-based pricing war, which had been a concern for top competitors in the sector. The analysts believe that McDonald’s strategy will allow the company to maintain momentum without disrupting market dynamics, while also avoiding unnecessary margin pressure. Based on a valuation of 18 times the firm’s 2025 EV/EBITDA estimate, Loop Capital continues to see upside potential for McDonald’s stock, justifying its Buy rating.

• Tigress Financial upgrades McDonald's Corporation (NYSE:MCD) to Buy, raising its price target to $360.
• McDonald's is advancing its digital transformation strategy to enhance operations and customer experience.
• The company's focus on digital innovation and the positive outlook from financial analysts suggest a promising future.

Tigress Financial recently shifted its perspective on McDonald's Corporation (NYSE:MCD), upgrading its rating to Buy from a previous hold position. This adjustment, announced on September 3, 2024, signifies a bullish outlook on McDonald's future financial performance. The firm also increased its price target for McDonald's from $355 to $360, as reported by TheFly. This move suggests a strong belief in McDonald's growth trajectory and its ability to deliver value to its shareholders.

McDonald's, a global leader in the fast-food industry, is not just about burgers and fries; it's also making significant strides in digital transformation. According to a company profile published by ResearchAndMarkets.com and announced on the same day as Tigress Financial's rating upgrade, McDonald's is pushing forward with a digital transformation strategy. This strategy includes the adoption of accelerators, incubators, and innovation programs aimed at bolstering the company's technological capabilities and enhancing its market position. Such initiatives are pivotal for McDonald's as they aim to improve operations and the overall customer experience, showcasing the company's commitment to leveraging digital innovation.

The timing of Tigress Financial's upgraded rating and McDonald's announcement of its digital transformation efforts could not be more opportune. As the company embarks on enhancing its technological footprint, investor confidence seems to be growing, reflected in the revised price target. This confidence is further supported by McDonald's stock performance, with a slight decrease of $1.47 or -0.5122%, indicating a stable market position with a market capitalization of approximately $204.82 billion. Despite the day-to-day fluctuations, McDonald's shares have shown resilience, reaching a high of $302.39 over the past year.

In contrast, the broader stock market has faced challenges, as highlighted by the significant decline in NVIDIA Corporation's (NASDAQ:NVDA) stock value following its second-quarter earnings report. This downturn, which erased a market value comparable to the combined worth of McDonald's, Disney, and Coinbase, underscores the volatile nature of the stock market. However, McDonald's steady market capitalization and strategic initiatives to embrace digital transformation set it apart, suggesting a potentially more stable investment option.

McDonald's commitment to digital innovation, combined with the positive outlook from Tigress Financial, paints a promising picture for the company's future. As McDonald's continues to integrate technology into its operations, it not only aims to enhance the customer experience but also solidify its position in the competitive fast-food industry. This strategic focus, coupled with the financial analysts' confidence, indicates a bright future for McDonald's, making it a noteworthy consideration for investors.

McDonald's (NYSE:MCD) shares rose more than 3% on Monday after Evercore ISI analysts raised the price target on the stock from $300 to $320, while maintaining an Outperform rating, citing optimism about the US business recovery through the second half of 2024 and into 2025.

The analysts highlighted recent improvements in market share trends and a stronger brand perception, buoyed by successful sales initiatives like commemorative cups, which have positively impacted Q3 sales. They anticipate that McDonald's will effectively implement a value-driven, multi-tiered menu strategy, leading to stronger same-store sales (SSS) growth. The analysts adjusted their 2025 US SSS estimate from 2% to 3%, reflecting confidence in McDonald's long-term performance as the company benefits from easing federal rates and improved sales trends.