McDonald’s (MCD) stock rallied after investors chose to see the glass half full following a mixed set of results from the fast food chain. Overall same-store sales growth of 0.4% beat Wall Street’s expectations for a decline of 1%, despite weaker-than-expected revenues from its U.S. business.
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An E. coli outbreak at the start of the quarter dented sales in the U.S., which fell 1.4% in the quarter against the expected decline of 0.6%.
In late October the Centers for Disease Control and Prevention linked a fatal E. coli outbreak to its Quarter Pounder burgers, which led to briefly to a steep decline in customers.
Despite this traffic in outlets was slightly positive over the quarter but spend was lower after the company rolled out a $5 combo meal over the summer as it sought to entice price-conscious customers.
International Offsets U.S. for MCD
Overall, the company reported a 4% decline in earnings per share for the Fiscal fourth quarter, which fell to $2.83 on an adjusted basis, a little below expectations. Revenues of $6.39 billion were flat on last year but came a little short of the $6.44 billion expected.
While the U.S. was weaker, both global divisions were up. The international developmental licensed markets segment, which includes the Middle East and Japan, delivered same-store sales growth of 4.1%. The international operated markets division, which includes the UK and France, saw same store sales growth of 0.1%. The UK and some other markets saw declines over the quarter.
Is MCD a Good Stock to Buy?
Overall, Wall Street has a Moderate Buy consensus rating on MCD, based on 13 Buys and eight Holds. The average MCD price target of $323.79 implies about 10% upside, although this figure may be revised in light of the earnings update.
