McDonald's (NYSE:MCD) Shares Up 2.7% - Time to Buy?

Key Points

• McDonald’s shares rose 2.7% to about $257 as investors viewed the stock’s roughly 18% annual decline as potentially overdone and drew encouragement from stronger restaurant-sector sales momentum.
• Upcoming promotions, including an $8 Quarter Pounder meal, seasonal drinks and a Pokémon Happy Meal, could support customer traffic, but the company also faces execution risks from its planned $8.5 billion technology overhaul.
• Analysts remain broadly positive, with a “Moderate Buy” consensus and an average price target of $295.64, while McDonald’s raised its quarterly dividend to $1.93, implying a roughly 3% yield; upcoming earnings will be a key catalyst.

McDonald's Corporation (NYSE:MCD - Get Free Report) shares shot up 2.7% during trading on Thursday. The stock traded as high as $257.64 and last traded at $257.3360. 4,493,071 shares were traded during mid-day trading, an increase of 5% from the average daily volume of 4,280,691 shares. The stock had previously closed at $250.50.

Key Stories Impacting McDonald's

Here are the key news stories impacting McDonald's this week:

• Positive Sentiment: Beaten-down valuation supports a potential rebound. McDonald’s has fallen about 18% this year, making the stock one of the weakest annual performers in decades. Technical analysts suggest the selloff may have gone too far, potentially attracting bargain hunters. Mapping the Market: Beaten-down McDonald's stock may be ripe for a rally
• Positive Sentiment: Restaurant-sector momentum is helping sentiment. McDonald’s moved higher alongside other restaurant stocks after Chipotle reported stronger-than-expected same-store sales, encouraging investors that customer traffic may be holding up across the industry. Chipotle Jumps 9% as Same-Store Sales Top Estimates
• Positive Sentiment: Value promotions and seasonal products could support traffic. McDonald’s is introducing an $8 Quarter Pounder meal beginning November 2, holiday drinks on November 3 and a Pokémon Happy Meal promotion in November. These offerings may improve value perception and attract families, although their financial impact is uncertain. $8 Quarter Pounder with Cheese meal
• Neutral Sentiment: Upcoming earnings are the next major catalyst. Wall Street expects earnings growth, but one analysis says McDonald’s lacks the indicators typically associated with a likely earnings beat. Investors will focus on U.S. traffic, international demand, margins and management’s outlook. McDonald's Reports Next Week
• Negative Sentiment: Large-scale technology spending carries execution risk. McDonald’s reported plans for an $8.5 billion overhaul involving an AI drive-through system called Archy. The initiative could improve efficiency, but a previous AI test was scrapped, raising concerns about implementation costs and reliability. McDonald's $8.5-billion overhaul

Analysts Set New Price Targets

Several research analysts have recently weighed in on the stock. JPMorgan Chase & Co. cut their price objective on shares of McDonald's from $280.00 to $260.00 and set an "overweight" rating on the stock in a report on Thursday, September 24th. Morgan Stanley dropped their price target on shares of McDonald's from $308.00 to $297.00 and set an "equal weight" rating for the company in a research report on Monday, September 28th. Wells Fargo & Company dropped their price target on shares of McDonald's from $300.00 to $270.00 and set an "overweight" rating for the company in a research report on Monday, October 5th. Sanford C. Bernstein cut their price target on shares of McDonald's from $295.00 to $250.00 and set a "market perform" rating on the stock in a research note on Thursday, October 8th. Finally, Weiss Ratings lowered shares of McDonald's from a "hold (c)" rating to a "hold (c-)" rating in a report on Friday, October 2nd. One analyst has rated the stock with a Strong Buy rating, twenty-two have given a Buy rating, thirteen have assigned a Hold rating and one has issued a Sell rating to the company. According to data from MarketBeat, the company has an average rating of "Moderate Buy" and an average target price of $295.64.

McDonald's Trading Up 2.7%

The firm has a market capitalization of $182.10 billion, a price-to-earnings ratio of 20.90, a price-to-earnings-growth ratio of 2.83 and a beta of 0.44. The firm has a 50 day moving average price of $248.68 and a two-hundred day moving average price of $283.93.

McDonald's (NYSE:MCD - Get Free Report) last posted its earnings results on Tuesday, August 4th. The fast-food giant reported $3.38 earnings per share (EPS) for the quarter, topping analysts' consensus estimates of $3.32 by $0.06. The firm had revenue of $7.10 billion during the quarter, compared to the consensus estimate of $7.13 billion. McDonald's had a net margin of 31.72% and a negative return on equity of 572.06%. The company's revenue was up 3.7% on a year-over-year basis. During the same quarter in the prior year, the company earned $3.19 EPS. As a group, research analysts forecast that McDonald's Corporation will post 12.83 earnings per share for the current year.

McDonald's Increases Dividend

The firm also recently disclosed a quarterly dividend, which will be paid on Tuesday, December 15th. Stockholders of record on Tuesday, December 1st will be given a $1.93 dividend. The ex-dividend date of this dividend is Tuesday, December 1st. This is an increase from McDonald's's previous quarterly dividend of $1.86. This represents a $7.72 annualized dividend and a dividend yield of 3.0%. McDonald's's dividend payout ratio (DPR) is currently 60.44%.

Hedge Funds Weigh In On McDonald's

Several hedge funds and other institutional investors have recently made changes to their positions in the business. State Street Corp increased its holdings in McDonald's by 1.8% in the second quarter. State Street Corp now owns 36,080,505 shares of the fast-food giant's stock valued at $9,752,921,000 after purchasing an additional 646,675 shares during the last quarter. Bank of New York Mellon Corp bought a new position in McDonald's during the second quarter worth about $1,359,276,000. Arrowstreet Capital Limited Partnership boosted its holdings in McDonald's by 17.2% during the first quarter. Arrowstreet Capital Limited Partnership now owns 3,637,785 shares of the fast-food giant's stock worth $1,130,587,000 after buying an additional 533,448 shares during the last quarter. Swiss National Bank grew its position in shares of McDonald's by 6.9% during the 1st quarter. Swiss National Bank now owns 2,089,980 shares of the fast-food giant's stock worth $649,545,000 after buying an additional 134,480 shares during the period. Finally, Dimensional Fund Advisors LP grew its position in shares of McDonald's by 3.4% during the 1st quarter. Dimensional Fund Advisors LP now owns 1,909,321 shares of the fast-food giant's stock worth $593,366,000 after buying an additional 62,562 shares during the period. Institutional investors and hedge funds own 70.29% of the company's stock.

McDonald's Company Profile

McDonald’s Corporation is a global quick-service restaurant company that operates and franchises restaurants under the McDonald’s brand. Its restaurants serve a menu that includes hamburgers, cheeseburgers, chicken sandwiches, French fries, breakfast items, desserts, salads, beverages and coffee. Offerings vary by market, and many locations provide drive-thru service, delivery and digital ordering through the McDonald’s mobile app.

The company operates through a heavily franchised business model, with restaurants owned and operated by independent franchisees, affiliates and the company itself.

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