Categories LATEST, Other Industries

Is McDonald’s stock an attractive long-term investment?

From cleaning fluid in latte to drug in soda, McDonald’s (MCD) has been making news for all the wrong reasons lately. The stock has been affected as well, falling 10% from the start of the year, making it one of the worst performers on Dow.

However, it is advisable that investors focus on the company’s turnaround strategy rolled out under CEO Steve Easterbrook. McDonald’s is now tasting the initial success of this turnaround strategy, which is visible in the company’s recent second-quarter earnings.

In the recent quarter, the company’s global comp sales rose 4%, reflecting positive comp sales in all segments. Comp sales in US alone rose 2.6% and systemwide sales grew 5% in constant currencies.

On the other hand, rival Starbucks (SBUX) reported comp sales growth of just 1% both globally and in the US in its recent Q3 2018. McDonald’s also saw double digit-growth in reported and adjusted earnings figures.

The positive result was mainly due to the refranchising strategy. McDonald’s aggressively refranchised its restaurants in several territories including China and Hong Kong last year. To increase its appeal, McDonald’s tweaked its menu offering to more healthier options, besides all-day breakfast.

Revenue Woes

Meanwhile, the company has been struggling with sinking revenues. Even in the recent Q2 2018, revenue slipped 12% to $5.35 billion. Though the company offers healthy alternatives, its core menu of burgers, fries and soda, is losing to more healthier options of other food chains. In Q2 2018, the company’s US foot traffic fell 0.3%. The trade war with China has led to a fall in the foot traffic in China also.

RELATED: McDonald’s earnings soar 12% in Q2 2018

Despite the drop in foot traffic, the company managed to report a growth in its same-store sales globally, a key metric for restaurant companies. In the long-term, if the company manages to revamp its menu to please its customers and stay away from serving debacles, it should sail smoothly in the coming years.

Consensus Recommendation

Out of all the analysts offering ratings, the stock earned a ‘BUY’/ ‘STRONG BUY’ rating from 13 analysts, based on data provided by Zacks Research.

Recent Infographic 

McDonald's second quarter 2018 earnings


Most Popular

Tyson Foods (TSN) Q1 2023 Earnings: Key financials and quarterly highlights

Tyson Foods Inc. (NYSE: TSN) reported first quarter 2023 earnings results today. Sales rose 2.5% year-over-year to $13.2 billion. Net income attributable to Tyson was $316 million, or $0.88 per

After weak start to 2023, Apple (AAPL) sees some bright spots

Apple Inc. (NASDAQ: AAPL) this week reported its first revenue decline in more than three years, even as the high inflation continues to squeeze customers’ spending power. Sales of the

Earnings: Qualcomm (QCOM) Q1 profit falls on lower revenues

Chipmaker Qualcomm, Inc. (NASDAQ: QCOM) has reported lower earnings and revenues for the first quarter of 2023. The company also provided guidance for the second quarter of 2023. At $9.5


Add Comment
Viewing Highlight