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MCD

McDonald's NYSE:MCD Stock Report

Last Price

US$235.34

Market Cap

US$173.1b

7D

-3.5%

1Y

-3.2%

Updated

03 Oct, 2022

Data

Company Financials +
MCD fundamental analysis
Snowflake Score
Valuation4/6
Future Growth2/6
Past Performance2/6
Financial Health2/6
Dividends5/6

MCD Stock Overview

McDonald's Corporation operates and franchises McDonald's restaurants in the United States and internationally.

McDonald's Corporation Competitors

Price History & Performance

Summary of all time highs, changes and price drops for McDonald's
Historical stock prices
Current Share PriceUS$235.34
52 Week HighUS$271.15
52 Week LowUS$217.68
Beta0.57
1 Month Change-7.53%
3 Month Change-6.72%
1 Year Change-3.18%
3 Year Change11.05%
5 Year Change46.98%
Change since IPO2,599.24%

Recent News & Updates

Sep 20

McDonald's: Current Thoughts On The Stock

Summary McDonald's tends to hold up well during economic downturns. The company produces loads of cash flow to sustain and grow the dividends. Given the nature of the business and the fundamentals, McDonald's stock can be held during these uncertain times. The market looks dismal these days as the Federal Reserve continues to raise interest rates to combat high inflation. So, investors need to tread carefully on which individual stocks to buy, sell, or hold. One that I choose to hold in this current economic environment is McDonald's (MCD). Less Volatile than Many Stocks McDonald's stock tends to hold up well during economic downturns and even through recessions. Sure, the stock may experience some declines, but it tends to perform better than cyclical companies and stocks with high beta during downturns. McDonald's has a beta of 0.57. The S&P 500 (SPY) has a beta of one. Therefore, McDonald's stock usually experiences significantly less volatility than the broader market. On the other end of the spectrum, there are stocks that have high betas. This includes some of the high growth stocks that I tend to cover. Stocks with betas above one tend to be more volatile with large swings in price in both directions. While I like to capture the swings on the upside, I would like to avoid large swings to the downside. However, when I consider making portfolio changes, McDonald's is one stock that I haven't considered selling. Less volatility is one reason for this. bigcharts.com As the chart above shows, McDonald's stock significantly outperformed the S&P 500 over the long-term. It may not beat out many of the high growth stocks over time, but MCD does tend to perform well. Steady Earnings and Cash Flow Growth MCD data by YCharts McDonald's rising stock price and increased dividends have been supported by the company's increasing earnings and cash flow over time. There is a good chance that these increases continue since MCD is expected to grow earnings at about 7.25% annually over the next 3 to 5 years. Operating cash flow is expected to grow at about 14% annually in 2022 and 2023. There is more to the business than just selling food and beverages. MCD's growth is supported by a business that operates like a real estate company or REIT. While MCD does not officially operate as a REIT, the company does earn franchise fees from its franchisees. McDonald's also owns the properties that are leased to the franchisees. Therefore, the company acts as a real estate company as it earns revenue from the franchisees. Steady Dividend Growth McDonald's increased the dividend every year for the past 20 years. The average dividend growth rate was 7% per year over the past 10 years. That is a great track record. Dividend growth can continue as MCD increases cash flow going forward. The company brought in over $8 billion in operating cash flow and had $5.4 billion in levered free cash flow over the past 12 months. Free cash flow per share is expected to grow at about 17% annually in 2022 and 2023. That should support future dividend increases. Seeking Alpha Valuation McDonald's looks overvalued at the moment with a forward PE of 25.9 and price to sales ratio of 8. This is above the Restaurant industry's forward PE of 24.3 and price/sales of 3. Given MCD's high valuation, I wouldn't recommend buying the stock at these levels. However, I am not recommending selling it either. I am neutral on the stock at the moment. Potential investors can be patient and may be able to pick up the stock at a lower valuation as the current bear market continues. Balance Sheet McDonald's balance sheet has some strengths and weaknesses. One strength is that MCD has 1.4x more current assets than current liabilities. However, a weakness is that the company has 1.13x more total liabilities than total assets with a negative shareholder equity of $6.4 billion. The company has about $1.9 billion in cash and equivalents. One major weakness is that MCD carries a high amount of total debt of $47.6 billion. While the total debt looks troubling on the surface, MCD's steady positive cash flow allows the company to effectively pay it off. MCD paid $2.7 billion of debt off over the past 12 months. Moody's has a rating of Baa1 for MCD with a stable outlook. Moody's (MCO) has a view that McDonald's will be able to maintain solid credit metrics and strong liquidity even in the face of higher inflation, staffing shortages, and supply chain issues. The Moody's rating also takes into consideration that MCD temporarily closed its stores in Russia and Ukraine due to the war. Cultural Adaptations One of the key aspects of the food side of MCD's business is the way the company offers meals that are specific to each region of the world. For example, while coffee is big in the U.S., a beverage known as milk tea is offered in Hong Kong where tea is a local favorite. The menu in India has numerous spicy meals and vegetarian offerings which suits the taste of consumers there. MCD in Canada offers poutine, which are french fries covered in gravy and cheese curds. Thailand offers a coconut sticky rice pie as a desert item. McDonald's in China has a honey chicken rice bowl since rice is a staple there. The Philippines menu offers fried chicken with McSpaghetti because I guess they must like that type of thing there. The U.S. offers fruit and maple oatmeal for those looking for a healthy breakfast option.

Sep 13

McDonald's strikes 15-year power purchase deal with EDF

McDonald's (NYSE:MCD) has reached a 15-year virtual power purchase agreement with EDF Renewables North America in a bid to address its restaurant electricity carbon footprint. McDonald's (MCD) has committed to purchase of clean energy from EDF's 255 MWac / 332 MWdc Apollo Solar project as part of its sustainability goals. Located in Texas, Apollo Solar is expected to begin delivery of low carbon electricity in June 2024. Approximately 300 jobs are expected to be created during the 2023-2024 construction phase with over $30M generated in new tax revenue over the operating life for taxing entities. Once complete, the project is expected to generate 619,000 MWh of low-carbon energy annually, enough to meet the consumption of over 1,200 McDonald's (MCD) restaurants across the U.S. MCD shares were down over 1% shortly before 12.30PM ET

Sep 07

We Maintain Our Hold Rating On McDonald's

Summary The uncertainty related to the Russian and Ukrainian operations has been significantly reduced. Second quarter financial performance remained strong and the demand for McDonald's products is still high. The valuation of McDonald's remains high compared to the consumer discretionary sector median. We maintain our hold rating on McDonald's. In May 2022, we wrote an analysis on the McDonald's Corporation (MCD) business and we concluded that the stock, at that time, could be rated as "hold." The analysis focused on pros and cons of buying MCD stock. The pros included: consistent share buybacks, safe and sustainable dividend payments and solid Q1 financial performance. On the other hand, we highlighted the uncertainty related to the Russia - Ukraine conflict and the relatively high valuation as the primary cons. In this article, we are presenting additional arguments why we still believe after several months that the stock is not a buy yet, despite some positive pieces of news. Let us start our argumentations again on the more optimistic side. Financial performance remained strong in the second quarter Many metrics have been indicating in the second quarter that the demand for MCD's products remains high. 1.) Global comparable sales increased 9.7%, reflecting positive comparable sales across all segments: U.S. increased 3.7% International Operated Markets segment increased 13.0% International Developmental Licensed Markets segment increased 16.0% 2.) Consolidated revenues decreased 3% (increased 3% in constant currencies). 3.) Systemwide sales increased 4% (10% in constant currencies) 4.) Consolidated operating income decreased 36% (30% in constant currencies). Results included $1.2 billion of charges related to the sale of the Company's business in Russia and a gain of $271 million related to the Company's sale of its Dynamic Yield business. Excluding these current year net charges and prior year net gains of $98 million, primarily related to the sale of McDonald's Japan stock, consolidated operating income was flat (increased 7% in constant currencies). 5.) Diluted earnings per share was $1.60, a decrease of 46% (41% in constant currencies). Excluding the net charges described above of $0.90 per share and nonoperating expense of $0.05 per share related to the settlement of a tax audit in France, diluted earnings per share for the quarter was $2.55, an increase of 8% (14% in constant currencies), when also excluding prior year net pre-tax gains of $0.10 per share and income tax benefits of $0.48 per share. While the decrease in operating income and diluted earnings per share is significant, in our opinion, it removes the uncertainty related to the Russian business and enables investors to form a clearer picture about the firm's operations in the near future. The sale of the business does not only provide more certainty, but also removes significant costs associated with keeping the closed restaurants. The closure of Russian locations since March has cost the company about $55M per month. It is also important to point out that despite the strong U.S. dollar, MCD global comparable sales and systemwide sales have still increased, while consolidated revenues have declined by only about 3%. In our view, the second quarter financial results, including the sale of the business related to the Russian operations, make the firm more attractive than in May. Uncertainty related to the Ukrainian operation is reduced In early August, the news came out that MCD would start reopening its restaurants in Ukraine in the coming months. McDonald's has a total of 109 restaurants in Ukraine, which is substantially less than the 850 locations that they used to have in Russia. It is still unclear, however, how many of these 109 locations would be reopened in the near future. The firm is likely to open restaurants in territories farther away from the conflict, including the capital, Kyiv, and the western regions of the country. We believe that this move also slightly reduces the uncertainty and gives an optimistic signal to shareholders and potential investors. With the reopening of some of the restaurants, we expect losses related to the Ukrainian part of the business to become narrower. While the uncertainty that we wrote about in our previous article has been largely reduced, in our opinion the valuation of MCD's stock still remains high, which is currently the main reason why we maintain our hold rating. Valuation Since our previous article on May 16th, MCD's stock price has increased by about 4%, while the broader market has declined by more than 2.5%. MCD data by YCharts On the other hand, despite the strong financial performance and the reduced uncertainty, the macroeconomic conditions and the fundamentals have not improved dramatically. High raw material and energy prices continue to create headwinds for the firms and the uncertainty of energy supply in Europe during the winter months may impact MCD's business as well in the near term. According to the traditional price multiples, while MCD trades about in-line with its own 5Y averages, it is trading at a more than 100% premium compared to the consumer discretionary sector median.

Sep 04
Estimating The Intrinsic Value Of McDonald's Corporation (NYSE:MCD)

Estimating The Intrinsic Value Of McDonald's Corporation (NYSE:MCD)

In this article we are going to estimate the intrinsic value of McDonald's Corporation ( NYSE:MCD ) by projecting its...

Shareholder Returns

MCDUS HospitalityUS Market
7D-3.5%0.6%1.0%
1Y-3.2%-32.1%-20.0%

Return vs Industry: MCD exceeded the US Hospitality industry which returned -34.1% over the past year.

Return vs Market: MCD exceeded the US Market which returned -23.2% over the past year.

Price Volatility

Is MCD's price volatile compared to industry and market?
MCD volatility
MCD Average Weekly Movement2.4%
Hospitality Industry Average Movement7.3%
Market Average Movement6.8%
10% most volatile stocks in US Market15.5%
10% least volatile stocks in US Market2.8%

Stable Share Price: MCD is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 2% a week.

Volatility Over Time: MCD's weekly volatility (2%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
1940100,000Chris Kempczinskihttps://corporate.mcdonalds.com

McDonald'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 Fundamentals Summary

How do McDonald's's earnings and revenue compare to its market cap?
MCD fundamental statistics
Market CapUS$173.14b
Earnings (TTM)US$6.08b
Revenue (TTM)US$23.59b

28.5x

P/E Ratio

7.3x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
MCD income statement (TTM)
RevenueUS$23.59b
Cost of RevenueUS$10.55b
Gross ProfitUS$13.04b
Other ExpensesUS$6.96b
EarningsUS$6.08b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

Oct 27, 2022

Earnings per share (EPS)8.27
Gross Margin55.29%
Net Profit Margin25.77%
Debt/Equity Ratio-543.8%

How did MCD perform over the long term?

See historical performance and comparison

Dividends

2.3%

Current Dividend Yield

66%

Payout Ratio