McDonald’s saw its stock climb to $309.84, edging up 1.57% on the day, beating the S&P 500’s 0.77% gain and the Dow’s 0.47% rise.
The Nasdaq, driven largely by tech momentum, increased 0.87%. However, over the past month, McDonald’s has gained just 2.87%, trailing the Retail-Wholesale sector’s 5.56% rise and the S&P 500’s 4.87% increase.
Picture: McDonald’s (MCD) shows a strong upward movement in recent sessions with the stock closing at 309.94 after opening at 302.10 on the VT Markets app.
Traders will focus on the fast-food leader’s upcoming earnings release, which is expected to show $6.76 billion in quarterly revenue—1.05% higher year-on-year.
However, EPS projections are less upbeat at $3.15, reflecting a 1.25% dip. For the full year, McDonald’s revenue is forecast at $26.04 billion, up 2.15%, but its EPS is projected at $11.71, down by 1.93%.
This blend of moderate revenue growth with declining profitability could influence trader sentiment.
The stock has undergone small positive revisions in analyst forecasts recently, hinting at a cautiously optimistic shift in market expectations.
Our research shows that such adjustments can closely align with near-term stock performance.
Valuations remain an area of interest, with McDonald’s trading at a forward P/E of 26.05, above the industry average of 22.22.
The stock’s PEG ratio stands at 4.06, indicating a premium relative to its expected earnings growth. In comparison, the broader Retail-Restaurant industry carries an average PEG ratio of 2.12.
This industry currently ranks 151st among the more than 250 industries tracked, positioning it in the bottom 41%.
Our research shows that industries in the top half tend to outperform those in the lower half by a 2:1 ratio, which could reflect lingering headwinds in the fast-food segment despite the broader retail sector’s gains.
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Market participants may adjust their expectations based on earnings results, and the valuation premium suggests limited room for error.
If McDonald’s fails to meet expectations, traders could rotate towards better-performing retail stocks with more favourable growth and valuation metrics.
On the other hand, any earnings surprise could provide momentum to the stock given the modest recent upgrades in analyst estimates.
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