McDonald's reported fourth-quarter results early Tuesday. The Dow Jones stock, also the world's largest restaurant chain by revenue, was expected to announce an earnings rebound as it recovers from the coronavirus pandemic and inflation pressures. McDonald's stock fell Tuesday following earnings.
Even McDonald's felt Covid's impacts as the pandemic shifted consumers' eating habits, CEO Chris Kempczinski said in an early November investors update. People are utilizing contactless order options while dining in less and more often opting for take out. Breakfast orders decreased as customers order lunch and dinner more often.
But restaurants are seeing greater clarity on food and labor cost inflation, which is matched by the industry's highest year-over-year menu pricing increase, JPMorgan analyst John Ivankoe wrote in a Jan. 18 research note. Ivankoe believes McDonald's will be one of the "winners" in the space as still-solid underlying consumption matches commodity, labor and energy disinflation. He raised his price target on McDonald's stock to 262 from 250 and maintained the overweight rating on the shares.
McDonald's Earnings
Earnings growth slowed for three quarters before declining in Q3. And sales fell the past two quarters after gains decelerated the three quarters prior.
Expectations: Adjusted earnings were expected to rise 10% to $2.45 per share on a 4.6% dip in revenue to $5.73 billion.
Results: Earnings jumped 16% to $2.59 per share and revenue slid 1.4% to $5.93 billion.
Same store sales increased for the last ten quarters. In addition, the company reported more customer visits for a second straigtht quarter, bucking the industry's traffic trend.
Total comparable sales rose 12.6% vs. 12.3% growth last year. FactSet analysts predicted a slip to 8.8% growth. McDonald's U.S. same store sales grew 10.3% during the period, driven by "strategic menu price increases and positive guest counts."
MCD Stock Chart
MCD stock is consolidating, although the chart pattern doesn't quite conform to any specific base definition. The current trading pattern has a 281.77 buy point, according to MarketSmith.
McDonald's stock is holding just above its 10-day moving average and 50-day moving average, as well as its 21-day exponential line. Aggressive investors could plot an early entry off the short-term high at 275.39.
MCD stock edged down 1.3% on Tuesday following results.
You can follow Harrison Miller for more news and stock updates on Twitter @IBD_Harrison.
