McDonald's Q4 Earnings: A Mixed Bag as Same-Store Sales Lag but Shares Rise

McDonald's (NYSE: MCD) reported its fourth-quarter earnings on Monday, delivering results that met Wall Street’s expectations on earnings per share (EPS) but missed on revenue. Despite some weak key metrics, the stock initially surged on investor optimism about the company’s long-term outlook. However, shares have been pulling back intraday, putting the rally at risk.

The fast-food giant posted adjusted EPS of $2.83, in line with consensus estimates, but down 4% year-over-year. Revenue came in at $6.39 billion, slightly below the expected $6.45 billion, reflecting ongoing challenges in its U.S. operations. Same-store sales growth was a weak 0.4%, outperforming expectations of a 1% decline but still representing the slowest growth rate in years. U.S. comparable sales declined 1.4%, marking the worst quarterly performance in five years, as consumers tightened spending and an E. coli outbreak in late October dampened traffic. Internationally, the company saw slight growth, with its International Operated Markets segment posting a mere 0.1% increase, while the International Developmental Licensed Markets segment led the way with a stronger 4.1% gain, driven by solid results in Japan and the Middle East.

Key Metrics and Business Trends

McDonald’s total systemwide sales exceeded $130 billion for the full year, with loyalty-driven sales contributing significantly. The company’s rewards program has been a bright spot, generating $30 billion in sales for the year and boasting 175 million active users, a 15% increase from the prior year. However, concerns remain over consumer spending habits, particularly among lower-income diners who are facing ongoing inflationary pressures.

One of the biggest challenges in Q4 was the U.S. market, where comparable sales fell 1.4%. While guest counts remained slightly positive, the decline in average check size was a key issue. Management pointed to pricing sensitivity among consumers, leading to fewer premium menu purchases. In an attempt to counteract this trend, McDonald's has been leaning heavily on value offerings, including its $5 meal deal, which helped stabilize traffic but did not fully offset the decline in spending per visit.

The International Operated Markets segment saw mixed results, with strength in markets like France but ongoing struggles in the U.K. Meanwhile, the International Developmental Licensed Markets performed well, with growth led by Japan and the Middle East. CFO Ian Borden highlighted that the Middle East recovery was partly due to lapping weaker comparisons from 2023, while China showed “encouraging signs of stabilization.”

E. Coli Impact and Recovery Outlook

One of the biggest overhangs on McDonald's U.S. business in Q4 was the E. coli outbreak linked to its slivered onions, which negatively impacted sales in late October and early November. Following the outbreak, McDonald's quickly switched suppliers, and by early December, the CDC had declared the issue resolved. However, the damage was already done, as consumer confidence took a hit, particularly in the affected regions.

The good news is that the impact appears to be fading. CEO Chris Kempczinski stated on the earnings call that the sales dip caused by the outbreak was largely confined to the Rocky Mountain region and that the company expects full recovery by Q2. Despite this, the broader trend of cautious consumer spending remains a challenge heading into 2025.

Inflation, Tariffs, and Food Prices

Inflation and broader macroeconomic pressures continue to weigh on McDonald's cost structure and consumer demand. The company acknowledged ongoing pressures on lower-income consumers, who are cutting back on discretionary purchases, including dining out. While McDonald's value menu has been an effective tool to retain customers, it has also put pressure on margins.

On the cost side, McDonald's noted some relief in food prices but warned that labor costs and inflation in certain international markets remain headwinds. The company also addressed tariff concerns, particularly in light of former President Trump’s announcement of potential 25% tariffs on steel and aluminum imports. While McDonald's does not manufacture its equipment, higher tariffs could indirectly raise costs if suppliers pass on price increases.

Expansion Plans and Strategic Initiatives

Looking ahead, McDonald's reaffirmed its ambitious growth plans, targeting 50,000 restaurants globally by 2027. For 2025, the company expects approximately 2,200 new restaurant openings, with net additions of about 1,800 locations. The majority of these expansions will be in international markets, with China alone accounting for nearly 1,000 new stores.

McDonald's is also focusing on digital initiatives and menu innovations to drive future growth. The company plans to reintroduce snack wraps in 2025, a move aimed at attracting younger consumers and boosting lunch and dinner sales. Additionally, new chicken strip menu items are expected to launch later this year, aligning with broader industry trends favoring chicken-based offerings.

Market Reaction and Stock Performance

Despite missing on revenue and reporting weak U.S. sales, McDonald's stock initially jumped more than 4% in premarket trading as investors focused on the company's international growth and recovery outlook. Shares rallied from $294 to $310 but have been pulling back intraday, putting the early gains in jeopardy.

Technically, McDonald's stock is at a critical juncture. It recently broke above resistance near $303.80 and is attempting to hold above the $310 level. However, if the intraday selling pressure continues, there is a risk of the stock falling back toward its 50-day moving average. Analysts remain mixed on the stock, with some pointing to valuation concerns amid slowing U.S. growth, while others highlight its global expansion potential as a key long-term driver.

Conclusion

McDonald's Q4 earnings report was a mixed bag, with global same-store sales outperforming expectations but U.S. sales declining more than anticipated. The E. coli outbreak in late 2023 weighed on results but appears to be fading, with management expecting full recovery by Q2. Inflation and macroeconomic pressures continue to impact consumer spending, particularly among lower-income guests, but the company’s value offerings and digital initiatives are helping mitigate some of these challenges.

Despite the revenue miss, investors reacted positively to management’s growth outlook and international strength. However, with the stock pulling back from its early gains, the near-term trajectory will depend on whether U.S. sales can rebound as expected. Looking ahead, McDonald's remains focused on aggressive expansion, menu innovation, and digital engagement as key levers for growth in 2025 and beyond.