Don't Expect McDonald's Earnings Beat to Help the Stock -- Here's Why
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Version 0 of 1. McDonald's (MCD) reported better-than-expected quarterly results Monday, but don't expect this to help the company's share price much. Shares fell in early trading. Positive earnings surprises typically lead to short-term price bumps, but McDonald's problems are significant. For the latest quarter, the company reported adjusted earnings per share of $1.44, topping the average analyst estimate for $1.41. Revenue of $6.03 billion beat estimates of $5.99 billion. Even so, revenue declined 5% from the same period a year earlier. The chart shows very little in terms of a trend. The stock's price has been consolidating narrowly, and last Thursday and Friday revealed a double-top formation, which could be seen as bearish. However, there is little to confirm this possible move so far. The chart as of Friday's close shows what has been happening as of last week. Traffic trends are disturbing for McDonald's. Millennials are not going to the chain as much as in the past, preferring Five Guys and similar chains. International revenue is also down. China was a star in the international revenue picture a few years ago, but even there revenues have been slumping. Before the market opened, we thought the stock might get a short-term lift from the earnings news, but that wasn't the case. Investors need to look at the longer-term picture, though. Has McDonald's peaked? If you're feeling bearish about McDonald's prospects for the near future, there are potentially profitable options strategies you can employ. The Feb. 3 options (expiring in 11 days) offer an opportunity for those who already own shares of McDonald's (or for those who are willing to take on the risk of writing an uncovered call option): |