McDonald's lowers first-quarter profit target

On Tuesday, Stifel maintained a hold rating on McDonald's Corp. (NYSE: ) but lowered its price target to $285 from $300 previously. The adjustment comes after the company reported first-quarter earnings, which showed earnings per share (EPS) rising slightly year-over-year to $2.70, just shy of the $2.72 consensus estimate.

The company's International Leading Markets (IDLM) comparable sales unexpectedly declined, down 0.2%, compared with Stifel's forecast of 1.0% growth. Ongoing conflict in some areas is believed to be a contributing factor, but there are no immediate signs of improvement.

In comparison, U.S. sales were in line with expectations, with comparable sales growing 2.5% and international operating markets (IOM) growing 2.7%, slightly lower than Stifel's forecast of 3%.

McDonald's management revised its full-year 2024 revenue forecast, now expecting the company to achieve only modest growth as macroeconomic headwinds are more pronounced than initially expected. Industry traffic trends have been flat or even negative in several major markets, including the United States, which affects this outlook revision.

The fast food giant has been facing the challenge of attracting low-income consumers and has therefore made a strategic move to work with domestic franchisees to develop attractive national value programs.

The measure is intended to address observed weakness in customer traffic. In light of these developments, Stifel also revised McDonald's 2024 adjusted earnings per share forecast to $12.00, a slight increase of 1% year-over-year.

Investment Professional Insights

As McDonald's Corporation adjusts to market conditions and develops future strategies, its financial health and stock performance remain key areas of concern for investors. The company's commitment to shareholder returns is evident, with a remarkable record of 49 consecutive years of dividend increases, a testament to its financial stability and investor-friendly policies.

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InvestingPro Tip highlights this consistency, with McDonald's stock typically trading with lower price volatility, indicating some resilience in the face of market volatility.

In terms of valuation, McDonald's currently trades at a price-to-earnings ratio of 23.55, which is considered attractive relative to its recent earnings growth, as another InvestingPro Tip highlights. This could signal potential opportunities for investors seeking stable income at a reasonable price. In addition, the company's dividend rate is 2.44%, continuing to provide shareholders with a stable source of income.

Investors paying attention to immediate metrics will note that McDonald's has a strong market capitalization of $197.18 billion, reflecting its significant position in the industry. Additionally, revenue growth in the last 12 months was 9.97%, demonstrating its ability to grow sales amid challenging economic conditions. The company's gross profit margin remained at a healthy level of 57.12%, reflecting its operating efficiency.

For those looking for deeper analysis and more InvestingPro tips, the InvestingPro platform offers additional insights, including the company's modest debt levels and its position as a prominent player in the hotel, restaurant, and leisure industry.To access these insights and more, consider using a coupon code PRONEWS24 Subscribe to Pro and Pro+ annually or every two years to get an additional 10% discount to further enrich your investment research with valuable information.

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