Why We’re Not Lovin’ McDonald’s Stock Right Now

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Scott Olson/Getty Images

Scott Olson/Getty Images

McDonald’s Corporation (NYSE:MCD) is a company that needs no introduction. Virtually everyone in modern society knows of the company and has visited one of their McDonald’s restaurants in the United States, Europe, the Asia/Pacific, the Middle East, Africa, Canada, and/or Latin America. The company, which operates over 35,000 restaurants, has a stock that has rewarded shareholders over time.

In fact, this high yielding stock has doubled investor’s money in just over two years, but the stock seems adrift now. It has pulled back nearly 10 percent from its all time highs, and seems like it will be under pressure moving forward. This is because McDonald’s recent performance left a lot to be desired.

The company missed estimates on the top and bottom lines in its most recent quarter. Global comparable sales were relatively flat, reflecting higher average check and negative guest traffic in all major segments. Consolidated revenues increased just 1 percent year-over-year. Consolidated operating income was flat. Its diluted earnings per share of $1.40 was an increase of just 1 percent year-over-year, but there was a decrease in diluted weighted average shares outstanding. The growth just is not there right now. However, one reason to own the stock is that the company returned $1.6 billion to shareholders through dividends and share repurchases in the quarter. But the stock probably will not be moving higher any time soon.

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