Here's Why McDonald's (MCD) Fell More Than Broader Market

McDonald's (MCD) closed at $315.73 in the latest trading session, marking a -3.24% move from the prior day. The stock's change was less than the S&P 500's daily loss of 1.36%. Meanwhile, the Dow experienced a drop of 1.64%, and the technology-dominated Nasdaq saw a decrease of 1.46%.

Prior to today's trading, shares of the world's biggest hamburger chain had lost 0.4% was narrower than the Retail-Wholesale sector's loss of 0.82% and the S&P 500's loss of 1.76%.

The investment community will be closely monitoring the performance of McDonald's in its forthcoming earnings report. It is anticipated that the company will report an EPS of $2.75, marking a 3% rise compared to the same quarter of the previous year. In the meantime, our current consensus estimate forecasts the revenue to be $6.49 billion, indicating a 8.88% growth compared to the corresponding quarter of the prior year.

Looking at the full year, the Zacks Consensus Estimates suggest analysts are expecting earnings of $13.24 per share and revenue of $28.71 billion. These totals would mark changes of +8.52% and +6.79%, respectively, from last year.

It is also important to note the recent changes to analyst estimates for McDonald's. These revisions typically reflect the latest short-term business trends, which can change frequently. Hence, positive alterations in estimates signify analyst optimism regarding the business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To exploit this, we've formed the Zacks Rank, a quantitative model that includes these estimate changes and presents a viable rating system.

The Zacks Rank system, ranging from #1 (Strong Buy) to #5 (Strong Sell), possesses a remarkable history of outdoing, externally audited, with #1 stocks returning an average annual gain of +25% since 1988. Over the past month, there's been a 0.09% fall in the Zacks Consensus EPS estimate. Currently, McDonald's is carrying a Zacks Rank of #3 (Hold).

In the context of valuation, McDonald's is at present trading with a Forward P/E ratio of 24.65. This indicates a premium in contrast to its industry's Forward P/E of 20.22.

Investors should also note that MCD has a PEG ratio of 2.9 right now. The PEG ratio bears resemblance to the frequently used P/E ratio, but this parameter also includes the company's expected earnings growth trajectory. The Retail - Restaurants was holding an average PEG ratio of 1.92 at yesterday's closing price.

The Retail - Restaurants industry is part of the Retail-Wholesale sector. With its current Zacks Industry Rank of 163, this industry ranks in the bottom 34% of all industries, numbering over 250.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow MCD in the coming trading sessions, be sure to utilize Zacks.com.

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This article originally published on Zacks Investment Research (zacks.com).

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