McDonald's Q4 Miss: Analysts Weigh In on 2025 Operating Margins

McDonald's Corporation (MCD) recently reported its fourth-quarter earnings, which included a revenue miss and a decline in US same-store sales. As investors and analysts digest the results, they are weighing in on the potential impact on the company's operating margins in 2025. Let's dive into the key takeaways and expert opinions on the matter.



Q4 Results in a Nutshell

* Global same-store sales rose 0.4%, while analysts had expected a 0.41% drop.
* US same-store sales declined 1.4%, more than analysts had anticipated.
* Adjusted EPS was $2.83, below the $2.87 expected by analysts.
* Revenue was $6.39 billion, missing analysts' estimates of $6.46 billion.

Analysts Weigh In on 2025 Operating Margins

1. Citigroup's Jon Tower: Tower maintained a Buy rating and raised the price target from $334 to $336 on Jan. 28, 2025. He noted that the consensus EPS for 2023 of $10.54 could see an upside towards $11.00, which would support his bullish stance on the stock.
2. Keybanc's Eric Gonzalez: Gonzalez maintained an Overweight rating and cut the price target from $330 to $320 on Jan. 24, 2025. He acknowledged the headwinds facing the business but remained optimistic about the company's long-term prospects.
3. Morgan Stanley's John Glass: Glass maintained an Overweight rating and lowered the price target from $340 to $336 on Jan. 21, 2025. He highlighted the company's strong balance sheet and cash flow generation as reasons to remain bullish on the stock.
4. Truist Securities' Jake Bartlett: Bartlett maintained a Buy rating and cut the price target from $350 to $342 on Oct. 30, 2024. He praised the company's strong earnings quality and growth forecasts, which support his positive outlook on the stock.
5. BMO Capital's Andrew Strelzik: Strelzik maintained an Outperform rating and raised the price target from $315 to $335 on Oct. 30, 2024. He cited the company's strong earnings quality and growth prospects as reasons to remain bullish on the stock.

What Lies Ahead for McDonald's Operating Margins?

As McDonald's navigates the challenges of a competitive fast-food landscape and a potentially slowing economy, analysts remain largely optimistic about the company's operating margins in 2025. The company's strong brand, global presence, and focus on value-centric deals and promotions are expected to drive sales and maintain profitability.

However, McDonald's must continue to adapt to changing consumer preferences and market conditions to maintain its strong operating margins. By improving menu engineering and pricing strategy, enhancing supply chain management, expanding digital and delivery capabilities, optimizing restaurant footprint and layout, and focusing on cost-cutting and efficiency, McDonald's can potentially improve its operating margins in 2025.

In conclusion, McDonald's Q4 results show a mixed performance, with global comparable sales returning to growth but US same-store sales declining. Analysts remain largely optimistic about the company's operating margins in 2025, citing the company's strong brand, global presence, and focus on value-centric deals and promotions. To maintain its competitive edge, McDonald's must continue to adapt to changing consumer preferences and market conditions by implementing strategic initiatives and changes in its business model.