Core Insights - McDonald's is extending its $5 Meal Deal through August, which includes a McDouble or McChicken, a four-piece nugget, a small fry, and a small fountain beverage, aimed at attracting budget-conscious customers amid ongoing inflation [1][2] - The decision to extend the offer was supported by 93% of McDonald's US restaurants, although the availability may vary by location [1] - The $5 Meal Deal has successfully increased customer visits, with a reported 8% increase on its launch day compared to the average Tuesday, and at least 5% more visits throughout the launch week [3] Company Performance - McDonald's experienced a quarterly profit miss in April, with sales growth declining for the fourth consecutive quarter to 1.90%, below analysts' expectations of 2.35% [5] - The CEO noted that consumers are becoming more selective in their spending, indicating a trend across all income levels seeking value [5] - The company is set to report its second-quarter earnings at the end of July, which will provide further insights into its financial performance [5] Competitive Landscape - The introduction of value meals and discounts by casual dining chains like Starbucks and Chili's has also positively impacted their traffic and sales [4] - McDonald's $5 Meal Deal competes directly with similar offerings from rivals such as Wendy's and Burger King, as the fast-food industry navigates challenges posed by inflationary pressures [4]

Summary of McDonald's Earnings Outlook Core Viewpoint - The market anticipates a year-over-year decline in McDonald's earnings despite an increase in revenues for the quarter ended June 2024, with the actual results being crucial for stock price movement [1]. Financial Estimates - McDonald's is expected to report quarterly earnings of $3.08 per share, reflecting a year-over-year decrease of 2.8% [2]. - Revenue projections stand at $6.66 billion, which is a 2.6% increase from the same quarter last year [2]. Estimate Revisions - The consensus EPS estimate has been revised down by 0.53% over the last 30 days, indicating a bearish sentiment among analysts regarding the company's earnings prospects [2][5]. - The Most Accurate Estimate for McDonald's is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -1.28% [5]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive or negative reading indicates the potential deviation of actual earnings from the consensus estimate, with a focus on positive readings for predictive power [3][4]. - McDonald's current Zacks Rank is 3 (Hold), which, combined with a negative Earnings ESP, complicates the prediction of an earnings beat [5][6]. Historical Performance - In the last reported quarter, McDonald's was expected to post earnings of $2.71 per share but delivered $2.70, resulting in a surprise of -0.37% [7]. - Over the past four quarters, McDonald's has beaten consensus EPS estimates three times [7]. Conclusion - While an earnings beat or miss can influence stock movement, other factors may also play a significant role in investor sentiment [8]. - McDonald's does not currently appear to be a strong candidate for an earnings beat, suggesting that investors should consider additional factors before making investment decisions [8].

Core Insights - McDonald's is extending its $5 value meal promotion beyond the initial four-week period due to its success in driving customer traffic back to restaurants [1][2] - The promotion, which includes a McChicken or McDouble, four-piece chicken nuggets, fries, and a drink, was initially set to last until late April but will now continue through August in most locations [1] - The decision to extend the promotion was supported by nearly all business units, covering 93% of McDonald's restaurants [1] Industry Context - The extension of the $5 meal deal comes as restaurants are facing challenges with declining customer traffic, particularly among lower-income consumers who are sensitive to rising prices [2] - Competitors such as Burger King, Wendy's, Taco Bell, and Starbucks are also offering similar value deals ranging from $3 to $5 to attract value-conscious customers in a competitive market [2] - Coca-Cola has contributed marketing funds to enhance the appeal of the value meal for franchisees, indicating a collaborative effort to sustain the promotion long-term [3]

Core Viewpoint - McDonald's stock has experienced a 12% decline year-to-date, currently priced around $260 per share, indicating limited near-term gains due to rising costs and consumer pushback against price increases [1][2] Financial Performance - In Q1 2024, McDonald's revenue grew 5% year-over-year to $6.2 billion, driven by a 2% increase in global comparable sales, marking the 13th consecutive quarter of same-store growth [3][4] - The adjusted bottom line for Q1 2024 grew 2% year-over-year to $2.70 per share [3] - Forecasted revenues for fiscal year 2024 are $26.9 billion, representing a 5% year-over-year increase, with expected EPS at $12.21 [4][5] Market Position and Valuation - McDonald's shares are trading at a forward price-to-earnings ratio of 22x, which is below the five-year average of 28x, suggesting potential for long-term price appreciation [1] - The revised valuation for McDonald's is set at $280 per share based on the expected EPS and a P/E multiple of 22.9x for fiscal year 2024, indicating a nearly 7% upside from the current market price [5] Competitive Landscape - McDonald's has underperformed compared to the S&P 500 in recent years, with stock returns of 25% in 2021, -2% in 2022, and 13% in 2023, while the S&P 500 saw returns of 27%, -19%, and 24% respectively [2][3] - The company faces challenges from rising costs and slowing traffic across major markets, including the U.S., U.K., Australia, Germany, Canada, and Japan [1][3]

Core Insights - Fast-food and casual dining chains are successfully attracting customers with affordable meal deals amid ongoing inflation pressures [1][4] - McDonald's, Starbucks, Chili's, and Buffalo Wild Wings have reported increased foot traffic following the introduction of value-oriented promotions [1][2][3] McDonald's - McDonald's launched a $5 Meal Deal on June 25, which includes a McDouble or McChicken, a four-piece nugget, a small fry, and a small beverage, resulting in an 8% increase in visits compared to the year-to-date Tuesday average [1] - The deal contributed to an average of at least 5% more visits throughout the launch week [1] - Additionally, McDonald's introduced Free Fries Friday, offering a free medium fry with a $1 minimum purchase for app users, valid through the end of the year [1] Starbucks - Starbucks experienced a significant increase in foot traffic with its half-off iced drinks promotion on Fridays, which began on May 10, leading to a 20% spike in visits compared to the year-to-date average [1][2] - Prior to the promotion, visits on May 3 were 1.1% below the year-to-date average [1] Chili's - Chili's revamped its "3 for Me" value menu in April, introducing new options like the Big Smasher burger, with meals starting at $10.99 [2] - The week before the update saw a 4.7% increase in visits compared to 2023, while the week of the update experienced a 17.3% increase over the 2023 average [3] Buffalo Wild Wings - Buffalo Wild Wings introduced an unlimited boneless wings deal for $19.99 on Mondays and Wednesdays, which led to an 8% increase in foot traffic immediately after the launch [3] - Visits on Mondays and Wednesdays spiked by 45.6% and 49.3% respectively, and remained above average for seven weeks following the deal's introduction [3] Industry Context - The restaurant industry is responding to long-lasting inflation, which has seen food prices rise by 25% from 2019 to 2023, with grocery and fast-food prices sharply increasing since the pandemic [4] - The average price of a McDonald's Big Mac has risen to $5.29, reflecting a 21% increase since 2019 [4] - Despite inflation easing to around 2.6%, restaurants are focusing on affordable meal deals to attract cash-strapped customers [4]

Market Overview - The stock market is experiencing a surge, driven by investor optimism regarding potential interest rate cuts from the Federal Reserve, but historical trends indicate that such cuts often precede recessions [1] - Despite a strong labor market and positive trends like re-industrialization, there are concerns about GDP performance and the possibility of a recession [1] Stocks to Buy - **ThredUp (TDUP)**: An online resale platform that has shown resilience in a challenging economic environment, reporting Q1 revenue of $79.6 million, a 5% year-over-year increase, and gross margins of 69.5%. The company is narrowing its losses, with adjusted EBITDA loss down to $0.7 million [2][3] - The resale market is projected to more than double its market share, reaching $350 billion globally by 2028, positioning ThredUp to benefit from the shift towards secondhand goods [3] - **McDonald's (MCD)**: Recently launched a $5 meal deal to attract budget-conscious consumers. Despite a 13% year-to-date decline, McDonald's has historically performed well during economic downturns, suggesting potential for recovery [5] Stocks to Avoid - **Coinbase (COIN)**: The leading U.S. cryptocurrency exchange has seen its stock rise 181% over the past year, but faces significant challenges including decreased trading volumes and ongoing legal issues with the SEC. Insiders sold $383 million worth of shares in Q1, indicating potential lack of confidence [6][7] - **Robinhood (HOOD)**: The online brokerage reported record Q1 revenues of $618 million, a 40% year-over-year increase, but its business model faces scrutiny due to regulatory risks and reliance on volatile markets. The company is under investigation by the SEC, which raises concerns about its sustainability in a downturn [9][10]

Company Performance - McDonald's stock closed at $251.53, reflecting a -0.93% change compared to the previous day, underperforming the S&P 500's gain of 0.28% [1] - Over the last month, McDonald's shares increased by 0.13%, lagging behind the Retail-Wholesale sector's gain of 1.3% and the S&P 500's gain of 3.78% [1] - The upcoming earnings report is scheduled for July 29, 2024, with projected earnings per share (EPS) of $3.10, a decrease of 2.21% year-over-year, and expected quarterly revenue of $6.68 billion, an increase of 2.83% from the previous year [1] Fiscal Year Estimates - For the entire fiscal year, the Zacks Consensus Estimates project earnings of $12.17 per share and revenue of $26.6 billion, representing increases of +1.93% and +4.32% respectively from the prior year [2] - Recent changes to analyst estimates indicate a positive outlook for the company's business, with estimate revisions correlated with near-term share price momentum [2] Valuation Metrics - McDonald's has a Forward P/E ratio of 20.86, which is a premium compared to the industry's average Forward P/E of 18.8 [3] - The company has a PEG ratio of 2.86, compared to the Retail - Restaurants industry's average PEG ratio of 1.84 [3] Industry Ranking - The Retail - Restaurants industry ranks in the top 43% of all industries, with a current Zacks Industry Rank of 108 [4] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [4]

It is no secret now that while most of the market is focused on the developments inside the technology sector, particularly around stocks exposed to the wave in artificial intelligence, other extremes in the market are feeling a bit of pain. Some of these forgotten and beaten down sectors include the consumer discretionary names, as judged by the 14% underperformance from the Consumer Discretionary Select Sector SPDR Fund NYSEARCA: XLY against the broader S&P 500 in the past year.Leading this decline are st ...

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franswillemblok/iStock Editorial via Getty Images My last article about McDonald's (NYSE:MCD) was way back in 2015, and in it I suggested it might be a good time to take advantage of a recent spike in the stock by selling it. I like to sell spikes and buy dips so now I am suggesting the exact opposite since this stock has recently dropped quite a bit. I think this current pullback might be a chance for longer-term investors to buy this stock. This could also be an attractive trading opportunity for shor ...