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McDonald's (MCD) Gains But Lags Market: What You Should Know

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McDonald's (MCD - Free Report) closed at $264.52 in the latest trading session, marking a +0.76% move from the prior day. This change lagged the S&P 500's 1.64% gain on the day. At the same time, the Dow added 1.08%, and the tech-heavy Nasdaq gained 0.45%.

Prior to today's trading, shares of the world's biggest hamburger chain had gained 3.98% over the past month. This has outpaced the Retail-Wholesale sector's loss of 5.31% and the S&P 500's loss of 0.83% in that time.

Wall Street will be looking for positivity from McDonald's as it approaches its next earnings report date. The company is expected to report EPS of $2.32, up 36.47% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $6.03 billion, up 13.47% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $9.42 per share and revenue of $23.22 billion, which would represent changes of +55.7% and +20.9%, respectively, from the prior year.

It is also important to note the recent changes to analyst estimates for McDonald's. Recent revisions tend to reflect the latest near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. The Zacks Consensus EPS estimate has moved 0.42% higher within the past month. McDonald's is currently a Zacks Rank #3 (Hold).

In terms of valuation, McDonald's is currently trading at a Forward P/E ratio of 27.87. This valuation marks a premium compared to its industry's average Forward P/E of 23.

Investors should also note that MCD has a PEG ratio of 2.44 right now. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. Retail - Restaurants stocks are, on average, holding a PEG ratio of 2.04 based on yesterday's closing prices.

The Retail - Restaurants industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 240, which puts it in the bottom 6% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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