McDonald’s (MCD) Changes Are Working: Is Now The Time To Buy?


McDonald’s Corporation (NYSE: MCD)

McDonald’s is having an incredible day in the market after proving to investors that the changes the restaurant chain is making are working. Recently, MCD has been stuck between a rock and a hard place as sales dwindled. However, after working to solve the problem, it seems as though the company is moving in the right direction. Earlier today, McDonald’s reported earnings, beating analyst projections on both earnings per share and revenue. Today, we’ll talk about what we saw from earnings, the changes MCD has made to pick up sales, and what we can expect to see from the stock moving forward.

McDonald’s Beats Earnings And Revenue Expectations

In today’s earnings release, McDonald’s proved that it still has what it takes to grow, topping not only EPS estimates, but revenue projections as well. Here’s what we saw in today’s earnings release:

  • Earnings Per Share – Analysts expected to see growth in earnings per share over the same time last year. The expectations came in at $1.27 per share, which would have proven to be decent growth from the $1.09 we saw in the same quarter last year. However, McDonald’s topped those expectations, generating $1.40 per share in the quarter.
  • Revenue – Revenue also came in above projections. Analysts expected to see revenue come in at $6.41 billion for the quarter. McDonald’s actually produced $6.62 billion. However, according to MCD, even though they beat expectations, revenue could have been better. The company explained that currency headwinds weighed heavy on revenue in the quarter.
  • Sales – Investors have been incredibly concerned with regard to sales as of late. Unfortunately, McDonald’s simply couldn’t seem to drive higher sales for quite some time. However, that has changed. In fact, McDonald’s reported that sales at restaurants that have been open at least 13 months rose by 4%. US restaurants as a whole saw sales increase by 0.9%. This also came in above estimates. Established restaurants were expected to see a 1.9% increase in sales while US sales were expected to go up by only 0.2%.

All in all, this morning’s earnings release from MCD was overwhelmingly positive.

MCD Has Made Big Changes As Of Late

Sales issues at McDonald’s started as the result of consumers becoming more health conscious. For quite some time, MCD has been considered a very unhealthy place to eat, and the company had to combat that overall opinion. To do so, they added new, healthier menu items for consumers to choose from. These menu items included different salads, artisan sandwiches and the ability to choose apple wedges over french fries as a side for meals. While McDonald’s still isn’t viewed as the healthiest place to eat, they have obviously changed the way consumers view their food.

How The Market Reacted To Earnings

As we would expect, the market had an overwhelmingly positive reaction to MCD earnings. Currently (10:30), the stock is trading at $109.02 per share after a gain of 6.32% so far today.

What We Can Expect To See Moving Forward

While I didn’t expect that I’d be saying this after today’s earnings release, I have to say that my outlook with regard to MCD is starting to take a relatively bullish stance. It’s clear that the company is making moves that are pushing it in the right direction. As this continues, I think that we will see more positive earnings reports and more growth in the value of the stock moving forward.

What Do You Think?

Where do you think MCD is headed and why? Let us know your opinion in the comments below!

[Image Courtesy of Business Insider]


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