While U.S. tariffs continue to roil global markets, McDonald’s (MCD) has emerged as a clear victor, with its stock marching toward new heights. Unlike smaller quick-service restaurant (QSR) competitors grappling with import-driven cost spikes, McDonald’s sophisticated supply chain and lean business model insulate it from heightened trade war turbulence.
With a vast distribution network sourcing most products locally, McDonald’s sidesteps tariff pain, which should allow it to maintain low prices and win market share. In the meantime, despite its upward trajectory, MCD stock appears reasonably valued, presenting a compelling opportunity in uncertain times. I remain bullish on MCD stock, fully cognizant that this consumer favorite is flexible enough to sustain wider market volatility while painting its long-term uptrend.
A Fortress of Domestic Supply
McDonald’s has a unique advantage in the ongoing tariff war: an extensive, domestically focused supply chain that shields it from import duties. With over 40,000 restaurants worldwide, the company has spent decades building a logistics empire that sources most of its beef, produce, and wheat from local markets, particularly in the U.S., Canada, and Mexico. This effectively insulates McDonald’s from the 10% baseline tariffs imposed on most imports that took effect last week, which are set to have a much harsher impact on smaller QSR chains reliant on imports.
Essentially, McDonald’s local sourcing prowess keeps menu prices competitive, a critical edge as inflation-wary consumers seek value. While its rivals are destined to grapple with rising costs for imported ingredients, McDonald’s franchisees benefit from stable supply costs, preserving profit margins and customer loyalty. In a market where smaller players will have to pass tariff-driven costs to consumers to maintain a decent profit margin, McDonald’s regular pricing will shine and likely allow the company to win market share. In fact, an increase in sales could even unlock economies of scale that could metamorphose negative influences into profitable opportunities.
In the meantime, remember that McDonald’s plans to open 10,000 new restaurants by 2027, which means that its logistics network will have to expand even further to cover a larger franchisee count. If the current tariff war persists, the current advantage McDonald’s enjoys will not be a headwind in achieving this goal. This is especially true since it’s actually the franchisees that finance a store opening. On the contrary, the potentially struggling rivals will have a harder time expanding their footprint while embroiled in a price war.
A Lean Model Built for Resilience
On top of the domestic supply-driven benefits, McDonald’s lean business model adds a second layer of armor, making it a safe harbor for investors during the current tariff uncertainty. The parent company is a frictionless franchisor, collecting a fixed royalty between 4% and 5% of franchisee sales, regardless of input cost fluctuations. Considering that McDonald’s low prices, enabled by its tariff-proof supply chain, will likely drive solid or even growing sales, it’s safe to assume that these royalties translate into growing, high-margin, predictable sales. Analysts project a 2.4% revenue increase this year despite a gloomy QSR industry outlook.
The company’s rental income should be equally important to its resilience during today’s tariff war, which makes for another tariff-immune cash cow. McDonald’s owns the real estate for many franchise locations, leasing them back to operators at fixed rates. This is another steady, high-margin revenue stream unaffected by trade policies that further fortifies McDonald’s outlook. Last year, rental income and royalties accounted for most of McDonald’s operating profit, showing how great of a structural advantage McDonald’s has compared to its smaller QSR peers.
A Fair Price for a Premium Business
Despite MCD stock gradually climbing toward new highs, I believe it remains reasonably valued. At 25.7x this year’s expected EPS, MCD’s multiple is not farfetched for a company set to grow EPS by 5% during an incredibly uncertain industry environment.
McDonald’s has already weathered several downturns, evident in its incredible track record. This is reflected in its 50-year-long dividend growth track record, which places MCD stock within the elite group of stocks known as Dividend Kings. The current period of uncertainty should be no different for McDonald’s to persevere through.
Is McDonald’s a Good Stock to Buy?
Despite MCD’s sustained share price gains during the current tariff war, Wall Street maintains a bullish view of the stock. MCD features a Moderate Buy consensus rating based on 15 Buy ratings and 10 Holds issued over the past three months. Notably, not a single analyst is bearish on MCD stock. MCD’s average price target of $326.48 implies about 5% upside potential over the next twelve months.
Finding Light at the End of the Tariff Tunnel
Summing up, I see McDonald’s as a beacon of stability in a tariff-torn market, with its stock set to hit new highs in the coming weeks. The QSR giant offers investors a rare blend of growth and safety. Its fortress-like supply chain and lean, royalty-driven model shield it from trade war headwinds and position it to outpace its rivals, capturing market share with its low-priced menu.
At their current levels, shares aren’t cheap, but they are reasonably priced for a dividend king with a proven knack for thriving in chaos. As smaller QSRs stumble, McDonald’s disciplined expansion and tariff-proof cash flows will continue attracting investors in uncertain times.