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McDonald's Stock Slides 13% in 3 Months: Buy the Dip or Stay Away?
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Key Takeaways
MCD fell 13% in three months as investors weighed weaker low-income demand and margin pressure.
MCD expanded value menus, boosted marketing partnerships and launched new beverage offerings.
MCD expects revenue and EPS growth in 2026-2027 and targets about 50,000 restaurants by 2027.
McDonald’s Corporation (MCD - Free Report) stock has fallen 12.8% over the past three months compared with the industry’s decline of 6.8%. In the same time frame, the S&P 500 has returned 11%.
Investor sentiment has been pressured by concerns about a softer consumer spending environment, rising commodity costs, margin pressures and expectations of slower near-term sales growth. While the fast-food giant continues to gain market share and execute well operationally, Wall Street appears focused on the hurdles that could limit earnings growth in the coming quarters.
On the other hand, MCD has also underperformed compared with industry peers such as Starbucks Corporation (SBUX - Free Report) and Yum! Brands, Inc. (YUM - Free Report) , as shown in the chart below.
Price Performance
Image Source: Zacks Investment Research
Why Has McDonald's Stock Lost Momentum?
A key concern is the continued pressure on lower-income consumers, a customer group that represents an important portion of McDonald’s traffic. Management noted that while higher-income consumers remain resilient, lower-income diners are still reducing spending as they grapple with elevated fuel prices and broader inflation. Although McDonald’s value initiatives have helped recapture some of these customers, demand from this group remains weaker than historical levels, creating uncertainty around traffic growth.
Inflationary pressures are also weighing on investor confidence. Beef prices remain elevated globally, increasing operating costs across the system. Franchisees in both the United States and international markets are facing higher food, labor and operating expenses, which are putting pressure on profitability. While McDonald’s has leveraged supply-chain efficiencies and hedging strategies to mitigate some of these challenges, management warned that inflationary risks could persist into late 2026 and beyond.
Another issue is profitability. Despite healthy sales growth during the first quarter, management admitted that margins at company-operated restaurants in the United States were below expectations. Higher labor investments combined with restrained pricing actions hurt profitability, raising concerns about the pace of margin recovery. The company is now reviewing whether some company-operated restaurants could generate better returns under franchise ownership.
Investors are also digesting management’s outlook for the second quarter. The company expects a noticeable slowdown in comparable-sales growth following difficult comparisons with last year's highly successful Minecraft promotion. Although management remains optimistic about the underlying strength of the business, a slower growth trajectory often weighs on investor sentiment. Geopolitical uncertainty is another overhang. Ongoing tensions in the Middle East have increased supply-chain risks and contributed to higher energy and commodity costs. While the direct impact on first-quarter results was limited, the situation has added another layer of uncertainty for global consumer companies.
What Is McDonald's Doing to Revive Growth?
McDonald’s is responding aggressively by reinforcing its value leadership. The company recently expanded its McValue platform with a menu featuring items priced below $3 and a new $4 Breakfast Meal Deal. These offerings complement existing value bundles and are designed to attract cost-conscious consumers while driving traffic across dayparts.
The company is also leaning heavily on marketing and brand partnerships. Recent collaborations with Netflix and other entertainment franchises have helped generate consumer engagement, while the upcoming FIFA World Cup sponsorship is expected to provide another significant traffic-driving opportunity across key markets.
Menu innovation remains a major priority as well. McDonald’s has launched a new beverage platform in several markets, including the United States, Germany and Canada. The lineup features refreshers, crafted sodas and upcoming energy-drink offerings. Management views beverages as a sizable long-term growth category capable of driving incremental sales and customer visits.
At the same time, the company continues to gain market share in most of its major markets. Strong execution across value, marketing and menu innovation helped McDonald’s deliver positive comparable-sales growth and maintain momentum despite a difficult operating backdrop. Management also reaffirmed its long-term expansion plans and remains committed to reaching approximately 50,000 restaurants globally by 2027.
McDonald's Growth Projection Encourages
In the past 30 days, the company’s earnings for 2026 and 2027 have decreased by 14 cents each to $12.93 and $14.12, respectively. The Zacks Consensus Estimate for MCD’s 2026 and 2027 earnings per share indicates a year-over-year increase of 6% and 9.2%, respectively.
Image Source: Zacks Investment Research
The consensus estimate for revenues is pegged at $28.42 billion and $30.08 billion for 2026 and 2027, implying a year-over-year improvement of 5.7% and 5.8%, respectively.
MCD Stock Trades at a Discount
McDonald's is currently valued at a discount compared with its industry on a forward 12-month price-to-earnings basis. The company’s forward 12-month P/E ratio stands at 20.99X, lower than the industry’s average of 22.24X. Meanwhile, Starbucks and Yum! Brands are trading at P/E ratios of 34.42X and 21.37X, respectively.
P/E (F12M)
Image Source: Zacks Investment Research
Buy the Dip or Stay Away?
Despite McDonald’s strong brand, market-share gains and ongoing growth initiatives, investors may prefer to stay on the sidelines for now due to several near-term challenges. The company continues to face pressure from cautious spending among lower-income consumers, while persistent inflation in food, labor and operating costs is weighing on profitability across its restaurant network.
Management has also acknowledged margin weakness in its company-operated stores and expects softer sales momentum in the near term. Although McDonald’s is investing in value offerings, marketing campaigns and menu innovation to support growth, these initiatives may take time to offset the impact of a challenging consumer environment and rising costs. With earnings estimates moving lower and multiple external uncertainties still clouding the outlook, investors may find better risk-reward opportunities elsewhere until clearer signs of sustained demand improvement and margin recovery emerge.
View the Zacks #1 Rank List
Image: Bigstock
McDonald's Stock Slides 13% in 3 Months: Buy the Dip or Stay Away?
Key Takeaways
McDonald’s Corporation (MCD - Free Report) stock has fallen 12.8% over the past three months compared with the industry’s decline of 6.8%. In the same time frame, the S&P 500 has returned 11%.
Investor sentiment has been pressured by concerns about a softer consumer spending environment, rising commodity costs, margin pressures and expectations of slower near-term sales growth. While the fast-food giant continues to gain market share and execute well operationally, Wall Street appears focused on the hurdles that could limit earnings growth in the coming quarters.
On the other hand, MCD has also underperformed compared with industry peers such as Starbucks Corporation (SBUX - Free Report) and Yum! Brands, Inc. (YUM - Free Report) , as shown in the chart below.
Price Performance
Image Source: Zacks Investment Research
Why Has McDonald's Stock Lost Momentum?
A key concern is the continued pressure on lower-income consumers, a customer group that represents an important portion of McDonald’s traffic. Management noted that while higher-income consumers remain resilient, lower-income diners are still reducing spending as they grapple with elevated fuel prices and broader inflation. Although McDonald’s value initiatives have helped recapture some of these customers, demand from this group remains weaker than historical levels, creating uncertainty around traffic growth.
Inflationary pressures are also weighing on investor confidence. Beef prices remain elevated globally, increasing operating costs across the system. Franchisees in both the United States and international markets are facing higher food, labor and operating expenses, which are putting pressure on profitability. While McDonald’s has leveraged supply-chain efficiencies and hedging strategies to mitigate some of these challenges, management warned that inflationary risks could persist into late 2026 and beyond.
Another issue is profitability. Despite healthy sales growth during the first quarter, management admitted that margins at company-operated restaurants in the United States were below expectations. Higher labor investments combined with restrained pricing actions hurt profitability, raising concerns about the pace of margin recovery. The company is now reviewing whether some company-operated restaurants could generate better returns under franchise ownership.
Investors are also digesting management’s outlook for the second quarter. The company expects a noticeable slowdown in comparable-sales growth following difficult comparisons with last year's highly successful Minecraft promotion. Although management remains optimistic about the underlying strength of the business, a slower growth trajectory often weighs on investor sentiment.
Geopolitical uncertainty is another overhang. Ongoing tensions in the Middle East have increased supply-chain risks and contributed to higher energy and commodity costs. While the direct impact on first-quarter results was limited, the situation has added another layer of uncertainty for global consumer companies.
What Is McDonald's Doing to Revive Growth?
McDonald’s is responding aggressively by reinforcing its value leadership. The company recently expanded its McValue platform with a menu featuring items priced below $3 and a new $4 Breakfast Meal Deal. These offerings complement existing value bundles and are designed to attract cost-conscious consumers while driving traffic across dayparts.
The company is also leaning heavily on marketing and brand partnerships. Recent collaborations with Netflix and other entertainment franchises have helped generate consumer engagement, while the upcoming FIFA World Cup sponsorship is expected to provide another significant traffic-driving opportunity across key markets.
Menu innovation remains a major priority as well. McDonald’s has launched a new beverage platform in several markets, including the United States, Germany and Canada. The lineup features refreshers, crafted sodas and upcoming energy-drink offerings. Management views beverages as a sizable long-term growth category capable of driving incremental sales and customer visits.
At the same time, the company continues to gain market share in most of its major markets. Strong execution across value, marketing and menu innovation helped McDonald’s deliver positive comparable-sales growth and maintain momentum despite a difficult operating backdrop. Management also reaffirmed its long-term expansion plans and remains committed to reaching approximately 50,000 restaurants globally by 2027.
McDonald's Growth Projection Encourages
In the past 30 days, the company’s earnings for 2026 and 2027 have decreased by 14 cents each to $12.93 and $14.12, respectively. The Zacks Consensus Estimate for MCD’s 2026 and 2027 earnings per share indicates a year-over-year increase of 6% and 9.2%, respectively.
Image Source: Zacks Investment Research
The consensus estimate for revenues is pegged at $28.42 billion and $30.08 billion for 2026 and 2027, implying a year-over-year improvement of 5.7% and 5.8%, respectively.
MCD Stock Trades at a Discount
McDonald's is currently valued at a discount compared with its industry on a forward 12-month price-to-earnings basis. The company’s forward 12-month P/E ratio stands at 20.99X, lower than the industry’s average of 22.24X. Meanwhile, Starbucks and Yum! Brands are trading at P/E ratios of 34.42X and 21.37X, respectively.
P/E (F12M)
Image Source: Zacks Investment Research
Buy the Dip or Stay Away?
Despite McDonald’s strong brand, market-share gains and ongoing growth initiatives, investors may prefer to stay on the sidelines for now due to several near-term challenges. The company continues to face pressure from cautious spending among lower-income consumers, while persistent inflation in food, labor and operating costs is weighing on profitability across its restaurant network.
Management has also acknowledged margin weakness in its company-operated stores and expects softer sales momentum in the near term. Although McDonald’s is investing in value offerings, marketing campaigns and menu innovation to support growth, these initiatives may take time to offset the impact of a challenging consumer environment and rising costs. With earnings estimates moving lower and multiple external uncertainties still clouding the outlook, investors may find better risk-reward opportunities elsewhere until clearer signs of sustained demand improvement and margin recovery emerge.
MCD currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.