McDonald’s (MCD) stock dropped on Thursday after the fast-food chain reported its Q1 earnings results. The company posted adjusted diluted EPS of $2.67, beating Wall Street’s $2.66 estimate. However, adjusted diluted EPS was down 1% year-over-year from $2.70.
Q1 revenue reported by McDonald’s was $5.96 billion, worse than analysts’ estimate of $6.1 billion. It also represents a 3% decrease from the $6.17 billion reported in Q1 2024. A 3.6% drop in U.S. comparable sales affected MCD revenue. The company attributes this to one fewer day in February and negative comparable guest counts.
According to MainStreetData, McDonald’s comparable sales growth has struggled recently, resulting in a compound annual growth rate (CAGR) of -35%.
Inflation Holds McDonald’s Back
Analysts expected McDonald’s comparable sales to increase by 0.5% during Q1, but instead, they fell by 1%. America led this decline as consumers in the country faced economic uncertainty. This comes from inflation, high interest rates, the ongoing trade war, and tariffs. All of this can influence consumers to avoid discretionary spending, such as eating out.
McDonald’s has dealt with this type of pressure before, with a similar effect on its business last year. It countered that with its $5 Meal Deal, offering a budget menu option to price-conscious consumers. While that deal is still running in the U.S., it might not be enough to keep guests happy as economic uncertainty increases.
MCD stock was down 1.49% in pre-market trading today. However, the company’s shares are up 10.9% year-to-date and 19.81% over the past 52 weeks.
Is MCD Stock a Buy, Sell, or Hold?
Turning to Wall Street, the analysts’ consensus rating for McDonald’s is Moderate Buy, based on 15 Buy and 10 Hold ratings over the last three months. With that comes an average price target of $326.62, representing a potential 2.18% upside for MCD stock. These ratings and price targets will likely change as analysts update their coverage after earnings.
