McDonald’s stock (NYSE: MCD) saw a significant surge in trading on Monday, with shares rising 4.5% by noon ET. This upward movement stood out against the broader market, where the S&P 500 gained 0.5% and the Nasdaq Composite rose 1.1%. The rally came despite McDonald’s reporting fourth-quarter earnings and sales that fell short of Wall Street expectations. While the company’s revenue and profits were below forecasts, investors were encouraged by signs of improvement in key areas and the optimistic outlook provided by management.
For the fourth quarter, McDonald’s reported non-GAAP adjusted earnings per share (EPS) of $2.83 on $6.39 billion in revenue. Analysts had expected $2.86 in EPS on $6.48 billion in revenue, meaning the company missed both the top and bottom lines. Year over year, revenue declined 0.3%, and adjusted EPS dropped 4%. Despite these misses, there were promising trends in the revenue breakdown. Same-store sales in the U.S. dipped 1.4%, largely due to lower spending per customer, but international markets showed resilience. The international operated markets segment posted a 0.1% increase in sales, defying expectations of a 1.1% decline. Meanwhile, the international developmental licensed markets segment saw a 4.1% revenue rise, far exceeding the anticipated 0.4% drop. These positive results from international markets provided a silver lining for investors.
McDonald’s has faced lingering challenges, including the impact of an E. coli outbreak last year, which affected consumer confidence and sales. However, management expects these issues to subside by the second quarter, paving the way for improved profitability. The company is doubling down on strategies to enhance its digital ordering platform and emphasize value-oriented menu offerings. These efforts appear to be paying off, as McDonald’s reported improving trends in average check sizes and customer traffic in both the U.S. and international markets. Management believes these initiatives, combined with the recovery from past setbacks, will begin to yield more tangible results starting in the second quarter.
The optimism surrounding McDonald’s stock is notable, especially given its underperformance over the past year. While the S&P 500 has rallied 21%, McDonald’s shares have gained just 6%. This disparity suggests that the stock may have room to grow if the company’s strategies gain traction. Investors are betting on McDonald’s ability to revive its momentum, particularly as it focuses on digital transformation and customer value. If the company can sustain its current trends and build on its international success, it could be well-positioned for a stronger performance in the coming quarters.
Before jumping into McDonald’s stock, it’s worth considering the broader investment landscape. The Motley Fool’s Stock Advisor team recently highlighted what they believe are the 10 best stocks for investors to buy now—and McDonald’s didn’t make the list. These 10 stocks, according to the team, have the potential to deliver significant returns in the years ahead. For example, when Nvidia was recommended on April 15, 2005, a $1,000 investment would have grown exponentially by February 7, 2025. While past performance doesn’t guarantee future results, Stock Advisor’s average return of 0% (as of the same date) highlights its strong track record compared to the broader market.
McDonald’s stock rally on Monday reflects investor confidence in the company’s ability to turn things around despite its recent challenges. While the fourth-quarter results were mixed, the progress in international markets and the potential for profitability to rebound in the coming quarters are encouraging signs. However, as with any investment, it’s essential to do your due diligence and consider a diversified approach. If McDonald’s can execute on its strategic initiatives and sustain its positive momentum, it may prove to be a compelling opportunity for investors.
