McDonald's (MCD) stock is slightly higher in Tuesday's session after the fast-food giant beat top- and bottom-line expectations for its third quarter, though gains are limited as concerns over an E. coli outbreak linger.
In the quarter ended September 30, McDonald's revenue increased 2.7% year over year to $6.9 billion, driven by a 0.3% increase in comparable-store sales in the United States. Globally, comparable-store sales declined 1.5%. Meanwhile, earnings per share (EPS) were up 1.3% from the year-ago period to $3.23.
"We will stay laser-focused on providing an unparalleled experience with simple, everyday value and affordability that our consumers can count on as they continue to be mindful about their spending," said McDonald's CEO Chris Kempczinski in a statement. "McDonald's will continue to follow our Accelerating the Arches playbook to drive long-term growth globally and win in this environment."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The results beat analysts' expectations. Wall Street was anticipating revenue of $6.8 billion and earnings of $3.20 per share, according to Yahoo Finance.
"McDonald's comparable restaurant takings have fallen for a second consecutive quarter in a row suggesting that the golden arches' recent focus on value offerings hasn't yet delivered the intended uplift in volumes," said Derren Nathan, head of equity research at Hargreaves Lansdown, said in emailed commentary. "A return to growth in the U.S. was one ray of light, albeit only just. International market struggled with a dip in China, and the impact of the conflict in the Middle East more than offsetting an uplift in Latin America."
Update on McDonald's E. coli outbreak
McDonald's temporarily removed Quarter Pounders and slivered onions from its menu after the Centers for Disease Control and Prevention (CDC) announced an E. coli outbreak linked to the fast-food chain's hamburgers last week.
"While the situation appears to be contained, and though it didn't affect Q3 numbers, it's certainly an important development, which I know is on many of your minds," said CEO Chris Kempczinski on McDonald's conference call, adding that the company is sorry and committed to "making this right," according to CNBC.
On Sunday, McDonald's announced that Quarter Pounders will return to menus nationwide in the coming week. In addition, it will no longer source onions from the supplier linked to the outbreak.
Is MCD stock a buy, sell or hold?
McDonald's is down more than 5% since the E. coli news broke, but remains up roughly 2% for the year to date on a total return basis (price change plus dividends). And Wall Street is mostly bullish on the Dow Jones stock.
According to S&P Global Market Intelligence, the consensus analyst target price for MCD stock is $317.65, representing implied upside of just nearly 7% to current levels. Additionally, the consensus recommendation is Buy.
However, Hargreaves Lansdown's Nathan says that the blue chip stock, which is trading at 23 times forward earnings, "still aren't in bargain territory so expect some more volatility until the damage from the public health scare has been quantified."
Related Content
-
4 Money Habits Boomers Swore By That Millennials Are Walking Away FromMillennials are trading tradition for flexibility when it comes to building wealth.
-
Abu Dhabi Adventures: New Thrills, Iconic Sights and Disney’s Latest ParkDiscover the mix of culture, wildlife and modern marvels that make this Middle Eastern city a destination to watch.
-
How Much Do I Need to Retire? A Financial Professional Breaks Down Your OptionsWhat it all boils down to is will you be comfortable in retirement? Some people may rely on formulas, while others just aim for $1 million nest egg.
-
Despite Our Grumbles, America Still Delivers on the Dream: Perspective From a Financial Pro Who's Seen StuffSome of us might complain about the state of our nation (and those concerns are legit), but America still offers unparalleled opportunities and mobility that many people around the world only dream about.
-
Dow Rips 846 Points to New All-Time High: Stock Market TodayFed Chair Jerome Powell seems ready to cut interest rates in the fall but will still rely on incoming economic data about inflation and employment.
-
Bonds Pay in Good and Bad TimesBonds can act as a financial safety net through good times and bad. But different bonds carry different returns and risks, so do your homework before investing.
-
When You Need Capital Quickly, Think 'Ready, Set, Fund': A Financial Adviser's StrategyInvestors must be able to free up cash to meet short-term needs from time to time. This strategy will help you access capital without derailing your long-term goals.
-
I'm an Estate Planner: Moving Family Assets to a Safe Haven Abroad Could Be a Huge Headache for Your HeirsIn troubled times like these, wealthy clients may seek financial refuge outside of the U.S. But that could cause more tax and estate problems than it solves.
-
S&P 500 Extends Losing Streak Ahead of Powell Speech: Stock Market TodayStocks continued to struggle ahead of Fed Chair Powell's Friday morning speech at Jackson Hole.
-
A Timeline of Warren Buffett's Life and Berkshire HathawayBuffett was the face of Berkshire Hathaway for 60 years. Here's a timeline of how he built the sprawling holding company and its outperforming equity portfolio.
