McDonald’s Corporation (MCD) Expecting to Catch Fire in Short Term

The exact reason why investors have been taking down McDonald’s Corporation (NYSE:MCD) stock at a frenetic pace might seem like a bit of a head-scratcher at the moment, but that’s only if you are buying the stock for the wrong reasons. On 12 February, the shares dropped -0.29 points or -0.17 percent at $173.97 with a heavy trade volume of 4.691 million shares. After opening the session at $174.79, the shares went as high as $175.28 and as low as $173.8, the range within which the stock’s price traded throughout the day. The firm is left with a market cap of $135 billion and now has 773.25 million shares outstanding. McDonald’s Corporation (MCD) stock has lost -4.61 percent of market value in 21 trading days.

MCD stock has a trailing 3-year beta of 0.52, offering the possibility of a lower rate of return, but also posing less risk. The portion of a company’s profit allocated to each outstanding share of common stock was $7.64 a share in the trailing twelve months. The stock’s value has fallen -2.03 percent year to date (YTD) against a rise of 8.19 percent in 12 month’s time. The company’s shares still trade -8.86 percent away from its 1-year high of $190.88 and 18.48 percent up from 52-week low of $146.84. The average consensus rating on the company is 1.9, on a scale where 5 equates to a unanimous sell rating. In short, the mean analyst recommendations are calling this stock a buy.

McDonald’s Corporation (MCD) will probably climb 13.11 percent over the next 12 months, according to price target estimates compiled by finviz. Meanwhile, they have set a $210 price as 12-month high target. This represents a whopping 20.71 percent increase from where shares are trading today. The 12-month median price target assigned by the analysts stands at $200, which represents a return potential of 14.96 percent when compared to the closing price of the stock of $173.97 on Tuesday, February 12. The lowest price target for the stock is $174 — slightly more than 0.02 percent from MCD’s current share price.

History has shown that shares in McDonald’s Corporation have gone up on 18 different earnings reaction days and are predicted to add 0.02 percent when the company reports upcoming earnings. Investors will get their next glimpse of MCD’s Q1 earnings on April 23. Analysts are forecasting revenue to suffer decline of -3.9 percent to $4.94B in the fiscal first quarter, while earnings are seen soaring by nearly 1.68 percent to $1.82 per share. It earned $1.97 per share, better than the $1.89, adjusted, expected by Thomson Reuters consensus estimate. Revenue was $5.16B, in line with the $5.16B analysts expected. Earnings are estimated to increase by 32.8 percent this year, 8.12 percent next year and continue to increase by 6.55 percent annually for the next 5 years.

Let’s take a look at some insider activity at McDonald’s Corporation (NYSE:MCD) and see the pattern. The earliest insider trade took place on 02/06/2019. Henry Daniel parted with a total of 3.04 thousand shares of company at average share price of $177.13. The total for the sales was set at $537.77 thousand. After this transaction, the EVP – Chief Info. Officer account balance stood at 0.03 thousand shares. The stock lost -1.78 percent since that insider sale. On 02/05/2019, Fairhurst David Ogden, EVP & Chief People Officer, sold 76.41 thousand shares at a price per share of $178.25. This removed 13.62 million shares from the insider’s fortune and the stock saw a -2.4 percent retreat in value since the news became public. This transaction left 3.15 thousand shares in the EVP & Chief People Officer account.

On 01/31/2019, Corp Exec VP – Corp Relations Gibbs Robert Lane performed a sale transaction worth $3.99 million. This sale at $180.95 each has eliminated 22.04 thousand shares from the insider’s portfolio position. Meanwhile, shares have recorded -3.86 percent decrease since the transaction was reported. The insider now is left with 3.94 thousand shares remaining in the account. Mckenna Andrew J, who performs the Chairman Emeritus job, sold 30 thousand shares for $5.41 million. The disposal occurred on 01/31/2019 was priced at $180.27 per share. The share price plunged -3.49 percent since the reporting date. Mckenna Andrew J now left with a stake of 43.15 thousand MCD stock worth $7.51 million after the insider selling.

The stock is currently hovering around the first support level of $173.42. Below this, the next support is placed in the zone of $172.87. Till the time, the MCD stock trades above this level, bulls have nothing to fear. On momentum oscillators front, ‘RSI’ has touched 33.58 on daily chart, which may remain a cause for comfort. If the price breaks below $172.87 level on closing basis, then we may see more profit booking and the stock may show further weakness. On the flipside, hitting the $174.9 mark may result into a pull-back move towards $175.83 level.

Shares of McDonald’s Corporation (MCD) are trading at a P/E ratio of 22.81 times earnings reported for the past 12 months. The industry MCD operates in has an average P/E of 60.5. Its P/E ratio went as low as 19.42X and as high as 24.64 over the 5-year span.Further, it is sporting a 6.4 on the Price-to-Sales ratio. Compare this with the industry average P/S of 3.13. 51.3 percent is the gross profit margin for McDonald’s Corporation and operating margin sits at 45.8 percent. Along with this, the net profit margin is 25.9 percent.