Is it now a good time to buy stocks as McDonald’s is it a good meal?
After a period of massive inflation, the prices of quick service restaurants rose, McDonald’s(NYSE: MCD) I decided to lean on a worthy meal. In fact, in recent Q4 revenue calls, the company used the word “value” or “affordable” variations more than 50 times.
When the pricing competition for quick service restaurants heats up, McDonald’s tends to be on the top for a large franchise model. Dive into the latest results for the company and see if this is a good time to buy stocks.
McDonald’s overall fourth quarter results were largely inactive. The company saw the fear of E. coli early in the quarter and attracted the popular quarter pounder burgers from the menu in several places. It also led to several major traffic declines, particularly in affected US states. However, the company did a good job finding its sauce, its sliced onions, and the Centers for Disease Control and Prevention (CDC) declared the outbreak by early December.
US sales hit their trough in early November after the outbreak and then began picking up. Overall, the company’s US Same store sales It fell 1.4% in the quarter, but not too bad given the outbreak of foodborne illnesses. We noted that check sizes decreased, but there was a slightly positive count of guests.
Meanwhile, the international license market is much stronger, with sales at comparable stores rising 4.1%. The company evaluated sales in Japan and the Middle East for its strong results. Stores run by international companies have increased comparable store sales edge by 0.1%, damaged by UK weaknesses
Meanwhile, the same global store sales overall rose 0.4% compared to a 3.4% increase last year. This was ahead of analysts’ expectations that sales at the same store would fall by 1%, according to StreetAccounts. Total revenue for the quarter was $63.9 billion. As compiled by LSEG, it was shy to the $6.444 billion analyst consensus. Earnings per share adjustment (EPS) fell 4% to $2.83, but it met analysts’ expectations.
Looking ahead, the company said it plans to spend between $3 billion and $3.2 billion on developing new units this year. It plans to open around 2,200 restaurants in 2025, a quarter of which will be in the US and international operations segments. Meanwhile, they are about to add 1,000 new restaurants to China. Overall, we are looking to add 1,800 net units and grow the number of units by just over 4%.
He added that the adjusted operating margin is expected to exceed the 46.3% level seen in 2024, but the currency expects a headwind of around $0.20-0.30 on EPS.
McDonald’s plans have been further strengthening its value programme in the international market in the first quarter, starting with the launch of the McValue platform in the US this year. We noticed improvements in value recognition in parts of Europe with 4 Euro Happy Meal, noting that the $5 meal contract resonates with customers.
When asked about the impact on total margins, he said that these transactions encourage other purchases and that the average check for $5 meal deals is above $10. He also said that one ADD 1 ADD 1 with a dollar promotion comes with an overall check transaction.
Overall, the company expects a full sales recovery from the E.Coli incident by the start of the second quarter. Meanwhile, we are looking for margins that will improve compared to the 2024 level. He also said that there will be several new menu innovations this year and will continue to roll out the best burger initiatives. How hamburgers are assembled, cooked and improved customer satisfaction scores.
Image source: Getty Images.
McDonald did a good job navigating the fears of E. coli and minimizing the damage to sales. The effect can last up to Q1, but should generally be a quick recovery to return to normal.
Meanwhile, when many people complain about the prices of quick service restaurants, the company is clearly leaning towards value. This is a good move as it has done historically well by gaining market share historically during the pricing war to undermine its fast food burger competitors. A combination of food worth driving traffic and new menu items that invite customers to buy a full price tends to be good.
The company is also adopting digital orders to expand its loyalty program reach and to promote more sales through personalized offers. At the end of 2024 there were 175 million active loyalty members.
McDonald’s deals from an evaluation perspective Revenue from forward price (P/E) Just 25 times the 2025 analyst estimate. It relates to the company’s historical evaluation.
Overall, McDonald’s should be a solid inventory for long-term ownership. This is an iconic brand with still room for store-based growth, with room to drive growth through digital ordering and loyalty programs, by embracing its value roots and gaining market share.
Consider this before purchasing stocks at McDonald’s.
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Jeffrey Sayler There is no position in any of the stocks mentioned. Motley’s fools have no position in any of the stocks mentioned. To Motley’s fool Disclosure Policy.
