McDonald’s Corporation (NYSE:MCD)
McDonald’s reports earnings on July 26 2016 before the stock market opens. The company, which is the world’s largest hamburger chain in the fast food restaurants sector, and who serves nearly 70 million hungry customers daily in nearly 120 countries, has around 36,525 restaurants worldwide, and they employ a massive 420,000 people. WOW!
On a personal note, I had the privilege of meeting with a friend who has recently moved out of state and was back in town on family business affairs. We chose to meet up at a local McDonald’s establishment (where I haven’t frequented for my own dining needs or pleasures in over 25 years) for two reasons. Number one- my good friend wanted a nice cold fountain soda. Number two- we wanted an easy to find, easy to enter and exit establishment that might not be too busy and packed and that might be clean where we may sit and chat for a bit. I, by the way, opted for a “McCoffee”. While we knew we were not in a Starbucks (NASDAQ:SBUX) nor a Barnes and Noble (NYSE:BKS) relaxing in comfortable chairs, we both found the ambiance quite apropo for our needs. It WAS very clean; it WAS nicely QUIET for a private conversation and we felt comfortable being there as adults- relaxing and enjoying each others company when we both fully knew McDonald’s is known as a children’s HANGOUT and stomping ground for excess blood sugar outletting. This leads to my take of McDonald’s as I exited and bid farewell to my friend til next visit: McDonald’s has definitely changed the game and made the environment much more conducive to people gathering, not just families or starving people converging on the most ubiquitous “burger” joint on the face of the earth.
The Chart
Above please see the daily price chart for MCD-McDonald’s. Note the areas of resistance and support in red and green respectively.
Analysts Comments and Expectations
According to a Bloomberg survey, 42.4% of analysts give McDonald’s a “buy” recommendation, 51.5% give it a “hold” recommendation, and 6.1% give it a “sell” recommendation. As the analysts raise their target prices for the next 12 months, the price of the stock may also rise, and vice versa. Although 1Q16 results were better than expected, concerns about the deceleration in same-store sales growth in the US burger industry, and analysts’ expectation that it will be hard for McDonald’s to post same-store sales growth, led to a decline in McDonald’s share price. These concerns also have prompted analysts to lower their price targets for the next 12 months to $130.8 from three-month-earlier estimates of $131.5. The new estimate represents a return potential of 5.7%. With EBIT margins expected to expand for the rest of fiscal 2016, and with $9.7 billion available to be returned to shareholders either through dividends or share repurchases within fiscal 2016, analysts are expecting McDonald’s to post EPS of $5.6 in fiscal 2016, which represents year-over-year growth of 11.6%. In 1Q17, analysts are expecting McDonald’s to post EPS of $1.4, which represents growth 10.4% from $1.2 in 1Q16. -marketrealist.com
Speculative Traders Plays
McDonald’s is drawing bullish option activity ahead of quarterly results next week. optionMONSTER’s monitoring program shows that about 17,900 Weekly 128 calls expiring on July 29 were purchased for $0.59 to $1.38 yesterday. This is clearly fresh buying, as open interest in the strike was just 155 contracts before the day began.Long calls lock in the price where investors can buy stock, allowing them to profit from a rally with limited capital at risk. Their cheap cost can also generate significant leverage on a percentage basis if shares move in the right direction. (See our Education section).MCD rose 2.18 percent to $126.50 yesterday but is down 4 percent in the last three months. The fast-food giant is scheduled to report earnings in pre-market hours on July 26.Overall option volume was 3 times greater than average in the name yesterday. Calls outnumbered puts by a bullish 5-to-1 ratio.-optionmonster.com
Company Profile
McDonald’s Corporation operates and franchises McDonald’s restaurants in the United States, Europe, the Asia/Pacific, the Middle East, Africa, Canada, and Latin America. The company’s restaurants offer various food products, soft drinks, coffee, and other beverages. As of December 31, 2015, it operated 36,525 restaurants, including 30,081 franchised restaurants comprising 21,147 franchised to conventional franchisees, 5,529 licensed to developmental licensees, and 3,405 licensed to foreign affiliates; and 6,444 company-operated restaurants. The company was founded in 1940 and is based in Oak Brook, Illinois.