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McDonald's (MCD)
NYSE:MCD
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McDonald's
(NYSE:MCD)
76Outperform
Positive Factors
Expansion Plans
McDonald’s plans to expand aggressively its chicken business, featuring McNuggets, McChicken, McCrispy and McSpicy along with new menu offerings.
Loyalty Program
The Company aims to increase its active loyalty user base by 66% to 250m 90-day active members by 2027, to drive greater mobile orders to its top 6 markets by 2025.
Negative Factors
Margins
Margins missed expectations partly due to the negative check mix-shift driven SSS miss.
Traffic Challenges
Traffic challenges are most acute among low-income consumers, impacting overall performance.
US Sales
U.S. sales are reportedly running negative as ticket sales were noted to be down.
McDonald's (MCD) vs. S&P 500 (SPY)
Market Cap
$227.39B
Dividend Yield2.29%
Average Volume (3M)3.77M
Price to Earnings (P/E)27.9
Beta (1Y)0.38
Revenue Growth1.67%
EPS Growth-1.61%
CountryUS
Employees150,000
SectorConsumer Cyclical
Sector Strength46
IndustryRestaurants
Share Statistics
EPS (TTM)11.39
Shares Outstanding714,461,100
10 Day Avg. Volume3,770,050
30 Day Avg. Volume3,769,272
Financial Highlights & Ratios
PEG Ratio93.94
Price to Book (P/B)N/A
Price to Sales (P/S)8.42
Price to Cash Flow (P/CF)20.70
P/FCF Ratio18.10
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$327.19Price Target Upside9.02% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering25
McDonald's Business Overview & Revenue Model
Company DescriptionMcDonald's Corporation operates and franchises McDonald's restaurants in the United States and internationally. Its restaurants offer hamburgers and cheeseburgers, chicken sandwiches and nuggets, wraps, fries, salads, oatmeal, shakes, desserts, sundaes, soft serve cones, bakery items, soft drinks, coffee, and beverages and other beverages, as well as breakfast menu, including biscuit and bagel sandwiches, breakfast burritos, hotcakes, and other sandwiches. As of December 31, 2021, the company operated 40,031 restaurants. McDonald's Corporation was founded in 1940 and is headquartered in Chicago, Illinois.
How the Company Makes MoneyMcDonald's primarily generates revenue through sales at its company-owned restaurants and franchise agreements. The company-owned locations contribute revenue directly from food and beverage sales. However, a significant portion of McDonald's income comes from franchise fees and royalties, which are percentages of franchisees' sales. Franchisees also pay rental income, as McDonald's often owns the property where the restaurant is located. This real estate strategy enhances its revenue model, providing stable and recurring income. Additionally, McDonald's benefits from strategic partnerships with beverage and food suppliers, which help manage costs and ensure consistent product quality across its global locations.
McDonald's Financial Statement Overview
Summary
McDonald's financial health is robust, with strong profitability and efficient cash flow management. The company demonstrates consistent revenue growth and substantial free cash flow, despite concerns about high leverage and negative equity. These factors provide a solid foundation for competitive positioning.Income Statement
McDonald's demonstrates strong profitability with a consistent increase in total revenue over the years. The company achieved a TTM revenue of $25.92 billion, up from $25.49 billion in the previous year, indicating stable growth. Gross profit margin remains robust, reflecting efficient cost management. The net profit margin and EBIT margin are solid, showcasing excellent operational efficiency. However, the slight decline in gross profit in the latest period warrants attention for cost control.88
Very Positive
Balance Sheet
The balance sheet indicates a high level of leverage with a negative stockholders' equity, which is a potential risk factor. The debt-to-equity ratio is unfavorable due to negative equity, highlighting dependence on debt financing. However, the return on equity is strong, driven by high net income, indicating effective use of shareholders' investments. Despite the negative equity, the company maintains robust asset utilization.72
Positive
Cash Flow
McDonald's exhibits strong cash flow generation with a healthy operating cash flow that consistently exceeds net income, reflecting strong cash conversion efficiency. The free cash flow remains strong despite fluctuations in capital expenditures, and the free cash flow to net income ratio remains favorable, indicating the company's ability to fund operations and investments internally. The positive trend in free cash flow growth over the years is a key strength.85
Very Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 25.92B | 25.49B | 23.18B | 23.22B | 19.21B | Gross Profit |
| 14.26B | 14.56B | 13.21B | 12.58B | 9.75B | EBIT |
| 11.85B | 11.65B | 9.37B | 10.36B | 7.32B | EBITDA |
| 12.30B | 13.86B | 12.22B | 12.03B | 9.23B | Net Income Common Stockholders |
| 8.22B | 8.47B | 6.18B | 7.55B | 4.73B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 1.08B | 4.58B | 2.58B | 4.71B | 3.45B | Total Assets |
| 55.18B | 56.15B | 50.44B | 53.61B | 52.63B | Total Debt |
| 51.95B | 53.09B | 48.70B | 48.64B | 48.52B | Net Debt |
| 50.86B | 48.51B | 46.12B | 43.93B | 45.07B | Total Liabilities |
| 58.98B | 60.85B | 56.44B | 58.21B | 60.45B | Stockholders Equity |
| -3.80B | -4.71B | -6.00B | -4.60B | -7.82B |
| Cash Flow | Free Cash Flow | |||
| 6.67B | 7.25B | 5.49B | 7.10B | 4.62B | Operating Cash Flow |
| 9.45B | 9.61B | 7.39B | 9.14B | 6.27B | Investing Cash Flow |
| -5.35B | -3.18B | -2.68B | -2.17B | -1.55B | Financing Cash Flow |
| -7.50B | -4.37B | -6.58B | -5.60B | -2.25B |
McDonald's Technical Analysis
Negative
300.11
Price Trends
303.04
Negative
296.52
Positive
287.03
Positive
Market Momentum
2.52
Negative
58.64
Neutral
62.60
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MCD, the sentiment is Negative. The current price of 300.11 is below the 20-day moving average (MA) of 307.48, below the 50-day MA of 303.04, and above the 200-day MA of 287.03, indicating a neutral trend. The MACD of 2.52 indicates Negative momentum. The RSI at 58.64 is Neutral, neither overbought nor oversold. The STOCH value of 62.60 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for MCD.
McDonald's Risk Analysis
McDonald's disclosed 33 risk factors in its most recent earnings report. McDonald's reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
McDonald's Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $67.88B | 42.45 | 45.67% | ― | 14.61% | 25.68% | |
76 Outperform | $227.39B | 27.94 | -216.57% | 2.29% | 1.67% | -1.61% | |
73 Outperform | $45.06B | 30.96 | -19.43% | 1.68% | 6.68% | -7.09% | |
68 Neutral | $15.91B | 27.78 | -14.74% | 1.41% | 5.07% | 13.74% | |
64 Neutral | $2.67B | 14.07 | 68.30% | 7.52% | 2.98% | -2.58% | |
62 Neutral | $100.25B | 28.52 | -47.07% | 2.67% | -1.48% | -17.32% | |
59 Neutral | $12.18B | 11.09 | -1.08% | 3.77% | 1.26% | -19.82% |
* Consumer Cyclical Sector Average
Performance Comparison
MCD
McDonald's
300.11
38.90
14.89%
CMG
Chipotle
47.29
-11.34
-19.34%
DPZ
Domino's Pizza
444.21
-50.84
-10.27%
SBUX
Starbucks
82.10
-2.92
-3.43%
WEN
Wendy's
13.30
-4.20
-24.00%
YUM
Yum! Brands
147.83
15.21
11.47%
McDonald's Earnings Call Summary
Earnings Call Date: Feb 10, 2025 | % Change Since: 2.56% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Neutral
The overall sentiment of the call reflects a mixed performance in 2024, with positive developments in specific international markets and strategic initiatives set to drive growth in 2025. However, the adverse impact of the E. coli outbreak in the US and challenges in key markets like the UK and Australia weigh on the outlook.Highlights
Positive Global Comp Sales Growth in Q4
Global comp sales increased 0.4% in the fourth quarter, showing positive comps across IDL and IOM segments despite challenges.
Incremental Benefits from Strategic Technology Platforms
Deployment of new solutions from strategic technology platforms in Consumer, Restaurant, and Company segments is expected to yield benefits.
Strong Performance in Canada and Germany
Canada saw positive guest count performance driven by value propositions and cultural campaigns. Germany achieved market share gains with innovative menu offerings.
Positive Developments in France
France showed improvement with positive comp sales and guest count gaps to competitors, driven by successful marketing campaigns.
Growth in Middle East and Japan
IDL segment comp sales increased by over 4%, driven by positive results in the Middle East and Japan.
Continued Expansion Plans
McDonald's plans to open approximately 2,200 restaurants in 2025, contributing to over 4% unit growth.
Lowlights
Global Comp Sales Decrease for Full Year
Global comp sales decreased by 0.1% for the full year 2024.
US Comp Sales Decline Due to E. coli Outbreak
US comp sales were down 1.4% in Q4, attributed to the impact of an E. coli outbreak.
Challenges in UK and Australia Markets
UK and Australia faced market challenges with underperformance in value offerings and marketing execution.
Pressure on Low-Income Consumers
Persistent spending pressure on low-income and family cohorts, particularly in Europe.
Decrease in Adjusted Earnings Per Share
Adjusted earnings per share decreased by 4% for the quarter compared to the prior year.
Lower Free Cash Flow Conversion
Free cash flow conversion was 81%, below the expected 90% range due to pressures on top-line performance.
Company Guidance
In McDonald's Fourth Quarter 2024 Investor Conference Call, the company provided several key metrics and guidance for the upcoming year. Global comparable sales decreased by 0.1% for the full year, though there was a 0.4% increase in the fourth quarter, driven by positive comps in the IDL and IOM segments. In the US, fourth-quarter comp sales were down 1.4% due to an E. coli outbreak, but the company anticipates a full recovery by the beginning of Q2 2025. McDonald's aims to maintain an operating margin in the mid to high 40% range for 2025, up from the 46.3% adjusted margin in 2024. The company plans to open approximately 2,200 new restaurants, contributing to a projected 4% unit growth. Despite challenges, McDonald's continues to focus on value and innovation, including the McValue platform and expanded chicken offerings, aiming for a return to positive guest count growth and increased market share.McDonald's Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
McDonald’s Appoints New Global Chief Experience Officer
Neutral
Mar 11, 2025
On March 10, 2025, McDonald’s Board of Directors announced changes to its senior management, appointing Gillian McDonald as Executive Vice President – Global Chief Restaurant Experience Officer, effective around May 1, 2025. This strategic move includes Manuel JM Steijaert taking over McDonald’s International Operated Markets division, potentially impacting the company’s operational focus and stakeholder interests.
Executive/Board ChangesBusiness Operations and Strategy
McDonald’s Approves 2025 Executive Incentive Plan
Neutral
Feb 14, 2025
On February 12, 2025, McDonald’s Corporation’s Compensation Committee approved the 2025 Target Incentive Plan (TIP) awards for executives, linking payouts to key performance metrics such as operating income, systemwide sales, new restaurant openings, and strategic initiatives. These metrics aim to align executive efforts with the company’s financial discipline, sales growth, and strategic goals, impacting the company’s operational success and stakeholder interests.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.