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Hewlett Packard and Tecnoglass have been highlighted as Zacks Bull and Bear of the Day
Read MoreHide Full Article
For Immediate Release
Chicago, IL – September 25, 2026 – Zacks Equity Research shares Hewlett Packard Enterprise (HPE - Free Report) as the Bull of the Day and Tecnoglass (TGLS - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on McDonald Corp. (MCD - Free Report) , Starbucks Corporation (SBUX - Free Report) and Dutch Bros Inc. (BROS - Free Report) .
Hewlett Packard Enterprise, a Zacks Rank #1 (Strong Buy), has pulled off one of the more impressive transformations in enterprise technology.
A company long dismissed as a slow-growth legacy hardware vendor has, in the span of about a year, remade itself into a genuine AI infrastructure and networking powerhouse — and the earnings estimates have been racing to catch up ever since.
The market has noticed. Shares have surged roughly 168% year to date, dramatically outpacing the broader technology sector's return of about 27%. That kind of relative strength, paired with accelerating fundamentals, is precisely what our rating system is built to identify.
A Leading Industry Group
HPE stock is part of the Zacks Computer – Integrated Systems industry group, an 11-stock cohort that currently ranks in the top 31% out of more than 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months.
Take note of the favorable characteristics for this group below. Stocks in this industry are relatively undervalued based on traditional valuation metrics, and are also expected to experience above-average earnings growth – a combination that should lead to higher prices in the future.
Historical research studies suggest that approximately half of a stock's price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It's no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Headquartered right outside of Houston, Hewlett Packard Enterprise provides servers, storage, networking, software and services to enterprises, governments and cloud providers worldwide. The business is organized around Networking, Cloud & AI, and Hybrid Cloud, supported by the HPE GreenLake platform that delivers IT as a consumption-based service.
The pivotal event was the Juniper Networks acquisition, which closed roughly a year ago and cleared its final legal hurdle in August when a federal court approved the company's settlement with the Department of Justice. Juniper transformed the scale and quality of HPE's networking business — the highest-margin part of the portfolio — and management reports integration is running ahead of schedule, with $600 million in annual run-rate synergies targeted by the end of fiscal 2028.
Alongside that, HPE has built a credible AI franchise spanning ProLiant servers co-engineered with NVIDIA, turnkey AI Factory deployments and Private Cloud AI solutions.
Earnings Trends and Future Estimates
The fiscal third quarter, reported earlier this month, was outstanding on every line. Revenue reached a record $12.21 billion, up 34% year over year and above the high end of guidance, topping the Zacks Consensus Estimate by 0.99%. Non-GAAP earnings of $1.11 per share crushed the 95-cent consensus by roughly 17% and rose more than 150% from a year ago.
The profitability story is the more remarkable one. Non-GAAP operating profit of $1.98 billion more than doubled, with operating margin expanding 770 basis points to 16.2% and non-GAAP gross margin reaching 40.4% against 29.9% a year earlier.
Free cash flow of nearly $1 billion was the highest third quarter in company history. HPE has now surpassed the Zacks Consensus Estimate in each of the trailing four quarters, averaging a 19.6% surprise.
Demand is outrunning shipments. Orders grew 42%, backlog hit a record, AI systems orders reached $2.4 billion (up more than 30% sequentially) and AI systems backlog climbed to $6.8 billion. After quarter-end, HPE was awarded a $3.5 billion inferencing deal with a hyperscaler customer, and it announced an expanded, multiyear collaboration with Oracle to supply routing and switching for a gigawatt-scale AI cloud build-out.
Management responded by raising guidance twice over. Fiscal 2026 revenue growth is now pegged at 34-37% with non-GAAP EPS of $3.75-$3.85 and free cash flow of at least $3.75 billion. The fiscal 2027 framework moved to 13-17% revenue growth, a 14-15% operating margin, EPS of $4.40-$4.60 and free cash flow of at least $5 billion.
Analysts have followed quickly: estimates for the current fiscal year have climbed 11.73% over the past two months. The Zacks Consensus Estimate now stands at $3.81 per share, reflecting better than 96% growth relative to the prior year.
Let's Get Technical
HPE has been one of the strongest large-cap performers in technology this year. This is exactly the kind of stock we want to include in our portfolio — one that is trending well and receiving positive earnings estimate revisions.
Notice how shares reside above upward-sloping 50-day (blue line) and 200-day (red line) moving averages, the hallmark of a healthy bull trend, with momentum building steadily throughout 2026.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, HPE has recently witnessed sharp upward revisions. As long as this trend remains intact (and HPE continues to deliver earnings beats), the stock will likely continue its bullish run.
Bottom Line
Backed by a leading industry group and a flawless record of recent earnings beats, it's not difficult to see why this transformation story has captured investor attention. Currently, HPE sports the highly coveted Zacks Rank #1 (Strong Buy).
With a record backlog, a $3.5 billion hyperscaler win in hand, and more Juniper synergies still to come, HPE remains one of the best stories in the market. Be sure to put it on your watchlist.
Tecnoglass manufactures and installs architectural glass, aluminum windows and vinyl windows for residential, multi-family and commercial construction across the Americas. Operating from a large vertically integrated complex in Barranquilla, Colombia, and serving primarily the U.S. market — with Florida historically its stronghold — the company was the first Colombian business to trade on a U.S. exchange and has since redomiciled to the United States.
For most of the past decade, Tecnoglass was a genuine growth story, compounding revenue at roughly 19% annually over five years while taking share from domestic window and glass suppliers. That top-line momentum has not stopped. What has changed, dramatically, is the company's ability to convert those sales into profit.
The squeeze is coming from several directions at once. Aluminum costs have risen sharply, tariffs are adding expense the company cannot yet fully offset, and a strengthening Colombian peso is inflating the cost base of a manufacturer that produces in pesos and sells in dollars. Management has said it does not expect to fully offset the tariff impact until 2027, which is a long time for shareholders to wait.
The structural wrinkle here is worth understanding. Tecnoglass's historic advantage was labor and manufacturing cost arbitrage — building in Colombia and selling into a high-priced U.S. market. Currency and tariffs attack that advantage directly, and neither is within management's control. The company's recent redomiciling to the United States and a shifting backlog mix beyond its Florida base are also reshaping the cost structure in ways that have yet to fully settle.
The Zacks Rundown
Tecnoglass has been a clear laggard, with shares down roughly 30% year to date and recently trading in the mid-$30s. A Zacks Rank #5 (Strong Sell), TGLS reflects sharply unfavorable earnings estimate revision trends, and the Zacks Consensus Estimate for the current year has been moving lower.
Shares are part of the Zacks Building Products – Miscellaneous industry group, which currently ranks in the bottom 35% out of approximately 250 Zacks Ranked Industries. Stocks in the bottom half of Zacks Ranked Industries face a persistent headwind, and while individual names can outperform a weak group, the industry association tends to cap the size and durability of any rally.
The Zacks Style Scores reinforce the concern. Tecnoglass carries a Growth Score of F, reflecting precisely the dynamic at the heart of this story: a business whose revenue keeps expanding while its earnings go the other way.
Cracks in the Foundation: Record Revenue, Collapsing Earnings
The second quarter, reported back in August, illustrates the problem perfectly. Tecnoglass delivered record revenue of $295.3 million, up 15.6% year over year and well ahead of expectations, alongside a record backlog of roughly $1.4 billion, also up 15.6%. On the surface, an excellent quarter.
Beneath it, profitability deteriorated sharply. Adjusted earnings came in at $0.54 per share against $1.03 in the year-ago quarter — a decline of nearly 48%. GAAP earnings of $0.55 fell 41.5%, net income dropped to $24.6 million, and gross margin compressed to 37.3%. Operating cash flow was just $4.4 million for the quarter, squeezed by tax payments, tariff-related outlays and aluminum pre-purchases. Management also paused share repurchases during the quarter to preserve working capital.
This was not an isolated quarter. Tecnoglass missed the Zacks Consensus Estimate by 9.9% in the third quarter of 2025 and by a steep 26.7% in the fourth, with earnings declining year over year in each.
The forward guidance offers little relief: the company narrowed full-year 2026 revenue guidance to $1.08-$1.12 billion with adjusted EBITDA of $220-$230 million, a midpoint that sits below where analysts had been modeling. More tellingly, management guided third-quarter revenue to roughly $280 million — a sequential decline — explaining that $15-$20 million of residential orders had been pulled forward ahead of May pricing actions. Borrowing from the next quarter to make the current one is rarely a sign of strength.
The estimate picture tells the same story from another angle. Analysts are modeling a year in which Tecnoglass grows sales by double digits but faces a sharp decline in profits. Estimates have continued to drift lower over the past several months. These are precisely the types of negative trends that the bears like to see.
Technical Outlook
TGLS stock has been carving out a well-defined downtrend. Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping lower, with shares trading below them and drifting toward the lower end of their 52-week range.
The persistent decline has produced a classic "death cross," wherein the 50-day moving average crosses below the 200-day moving average — a bearish technical signal that often precedes further weakness. Shares would need to mount a serious, high-volume move to the upside and show improving earnings estimate revisions to warrant taking any long positions.
Final Thoughts
A cheap multiple on falling earnings is not the bargain it appears to be, and the estimate revision trend is what drives stock prices over the horizons we care about.
A deteriorating fundamental and technical backdrop show that this stock doesn't deserve a spot in most portfolios right now. With tariff offsets not expected until 2027, aluminum and currency pressures unresolved, and third-quarter revenue guided lower sequentially, this stock should be avoided.
Additional content:
Can McDonald's NEXT Strategy Lift Operating Margin Above +50%?
McDonald's Corp. is targeting an operating margin in the low-to-mid 50% range by 2030 through its newly outlined McDonald's > NEXT strategy. The initiative combines restaurant modernization, technology deployment and simplified operations with efforts to strengthen customer demand.
Restaurant efficiency is a key component of the plan. McDonald's targets approximately 250 basis points of gross restaurant-level efficiency gains as NEXT elements are fully deployed across the United States and International Operated Markets. Initiatives include modernizing restaurant design, simplifying operations and deploying its generative AI-enabled ArchIQ platform at scale. The company estimates that these efficiencies are equivalent to roughly $100,000 in annual cash flow benefits for the average U.S. restaurant, with the majority expected to benefit restaurant profitability over time.
Franchisee investment returns are central to the rollout, as approximately 95% of McDonald's restaurants worldwide are independently owned and operated. The company plans to provide NEXT partnering support through rent relief and capital support, totaling approximately $5 billion by 2030 and $8.5 billion by 2036. McDonald's estimates an approximately four-year payback for franchisees after accounting for this support. Implementation is expected to be tailored to market conditions, with investment priorities guided by franchisee capacity and expected returns.
The productivity program is paired with measurable demand objectives. McDonald's aims to gain 1.5 percentage points of market share in each of the chicken and beverage categories by 2030 while maintaining its beef market share leadership. Nearly 220 million 90-day active loyalty members across 70 markets provide a sizable foundation for more personalized engagement.
Overall, McDonald's NEXT strategy pairs restaurant productivity improvements with efforts to strengthen customer demand. Simpler operations and technology deployment target greater efficiency, while menu innovation, value leadership and improved hospitality are intended to support customer visits. Supported by its scale and franchisee partnering commitments, these initiatives could help McDonald's achieve its operating margin target and free cash flow conversion in the mid-to-high 80% range by 2030.
How MCD's Peers Are Tackling Costs and Margins
Starbucks Corporation is combining operational improvements under its Back to Starbucks strategy with a $2 billion gross cost savings plan through fiscal 2028. Savings span product and distribution costs, operating expenses and general and administrative expenses. In third-quarter fiscal 2026, SBUX's consolidated non-GAAP operating margin expanded approximately 430 basis points year over year to 14.4%, supported by sales leverage, cost savings, lower inflation and tariff refunds.
North America's operating margin improved more than 100 basis points even excluding tariff refunds, as sales leverage and cost savings helped offset investments in Green Apron Service and menu innovation. Starbucks expects its fiscal 2026 consolidated non-GAAP operating margin outlook to be above 11%.
Dutch Bros Inc. is improving service capacity through staffing aligned with customer demand, shop layout refinements and equipment optimization. In second-quarter 2026, company-operated shop contribution margin was approximately 31%, while labor costs as a percentage of company-operated shop revenues declined 120 basis points year over year to 25.4%, primarily due to sales leverage.
Dutch Bros expects approximately 90 basis points of adjusted selling, general and administrative expense leverage for full-year 2026, partially offsetting higher coffee and occupancy costs. BROS' revised full-year adjusted EBITDA guidance of $385 million to $390 million incorporates approximately 20 basis points of year-over-year adjusted EBITDA margin pressure at the midpoint.
MCD's Price Performance, Valuation & Estimates
Shares of McDonald's have declined 21.2% over the past year compared with the industry's fall of 12.4%.
From a valuation standpoint, MCD trades at a forward price-to-sales (P/S) multiple of 5.77, above the industry's average of 2.93.
The Zacks Consensus Estimate for MCD's 2026 earnings per share (EPS) implies a year-over-year rise of 5.6%. The EPS estimates for 2026 have increased in the past 60 days.
Free: Instant Access to Zacks' Market-Crushing Strategies
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can tap into those powerful strategies – and the high-potential stocks they uncover – free. No strings attached.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Hewlett Packard and Tecnoglass have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – September 25, 2026 – Zacks Equity Research shares Hewlett Packard Enterprise (HPE - Free Report) as the Bull of the Day and Tecnoglass (TGLS - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on McDonald Corp. (MCD - Free Report) , Starbucks Corporation (SBUX - Free Report) and Dutch Bros Inc. (BROS - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Hewlett Packard Enterprise, a Zacks Rank #1 (Strong Buy), has pulled off one of the more impressive transformations in enterprise technology.
A company long dismissed as a slow-growth legacy hardware vendor has, in the span of about a year, remade itself into a genuine AI infrastructure and networking powerhouse — and the earnings estimates have been racing to catch up ever since.
The market has noticed. Shares have surged roughly 168% year to date, dramatically outpacing the broader technology sector's return of about 27%. That kind of relative strength, paired with accelerating fundamentals, is precisely what our rating system is built to identify.
A Leading Industry Group
HPE stock is part of the Zacks Computer – Integrated Systems industry group, an 11-stock cohort that currently ranks in the top 31% out of more than 250 Zacks Ranked Industries. Because it is ranked in the top half of all Zacks Ranked Industries, we expect this group to outperform over the next 3 to 6 months.
Take note of the favorable characteristics for this group below. Stocks in this industry are relatively undervalued based on traditional valuation metrics, and are also expected to experience above-average earnings growth – a combination that should lead to higher prices in the future.
Historical research studies suggest that approximately half of a stock's price appreciation is due to its industry grouping. In fact, the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.
It's no secret that investing in stocks that are part of leading industry groups can give us a leg up relative to the market. By focusing on leading stocks within the top 50% of Zacks Ranked Industries, we can dramatically improve our stock-picking success.
Company Description
Headquartered right outside of Houston, Hewlett Packard Enterprise provides servers, storage, networking, software and services to enterprises, governments and cloud providers worldwide. The business is organized around Networking, Cloud & AI, and Hybrid Cloud, supported by the HPE GreenLake platform that delivers IT as a consumption-based service.
The pivotal event was the Juniper Networks acquisition, which closed roughly a year ago and cleared its final legal hurdle in August when a federal court approved the company's settlement with the Department of Justice. Juniper transformed the scale and quality of HPE's networking business — the highest-margin part of the portfolio — and management reports integration is running ahead of schedule, with $600 million in annual run-rate synergies targeted by the end of fiscal 2028.
Alongside that, HPE has built a credible AI franchise spanning ProLiant servers co-engineered with NVIDIA, turnkey AI Factory deployments and Private Cloud AI solutions.
Earnings Trends and Future Estimates
The fiscal third quarter, reported earlier this month, was outstanding on every line. Revenue reached a record $12.21 billion, up 34% year over year and above the high end of guidance, topping the Zacks Consensus Estimate by 0.99%. Non-GAAP earnings of $1.11 per share crushed the 95-cent consensus by roughly 17% and rose more than 150% from a year ago.
The profitability story is the more remarkable one. Non-GAAP operating profit of $1.98 billion more than doubled, with operating margin expanding 770 basis points to 16.2% and non-GAAP gross margin reaching 40.4% against 29.9% a year earlier.
Free cash flow of nearly $1 billion was the highest third quarter in company history. HPE has now surpassed the Zacks Consensus Estimate in each of the trailing four quarters, averaging a 19.6% surprise.
Demand is outrunning shipments. Orders grew 42%, backlog hit a record, AI systems orders reached $2.4 billion (up more than 30% sequentially) and AI systems backlog climbed to $6.8 billion. After quarter-end, HPE was awarded a $3.5 billion inferencing deal with a hyperscaler customer, and it announced an expanded, multiyear collaboration with Oracle to supply routing and switching for a gigawatt-scale AI cloud build-out.
Management responded by raising guidance twice over. Fiscal 2026 revenue growth is now pegged at 34-37% with non-GAAP EPS of $3.75-$3.85 and free cash flow of at least $3.75 billion. The fiscal 2027 framework moved to 13-17% revenue growth, a 14-15% operating margin, EPS of $4.40-$4.60 and free cash flow of at least $5 billion.
Analysts have followed quickly: estimates for the current fiscal year have climbed 11.73% over the past two months. The Zacks Consensus Estimate now stands at $3.81 per share, reflecting better than 96% growth relative to the prior year.
Let's Get Technical
HPE has been one of the strongest large-cap performers in technology this year. This is exactly the kind of stock we want to include in our portfolio — one that is trending well and receiving positive earnings estimate revisions.
Notice how shares reside above upward-sloping 50-day (blue line) and 200-day (red line) moving averages, the hallmark of a healthy bull trend, with momentum building steadily throughout 2026.
Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. As we know, HPE has recently witnessed sharp upward revisions. As long as this trend remains intact (and HPE continues to deliver earnings beats), the stock will likely continue its bullish run.
Bottom Line
Backed by a leading industry group and a flawless record of recent earnings beats, it's not difficult to see why this transformation story has captured investor attention. Currently, HPE sports the highly coveted Zacks Rank #1 (Strong Buy).
With a record backlog, a $3.5 billion hyperscaler win in hand, and more Juniper synergies still to come, HPE remains one of the best stories in the market. Be sure to put it on your watchlist.
Bear of the Day:
Tecnoglass manufactures and installs architectural glass, aluminum windows and vinyl windows for residential, multi-family and commercial construction across the Americas. Operating from a large vertically integrated complex in Barranquilla, Colombia, and serving primarily the U.S. market — with Florida historically its stronghold — the company was the first Colombian business to trade on a U.S. exchange and has since redomiciled to the United States.
For most of the past decade, Tecnoglass was a genuine growth story, compounding revenue at roughly 19% annually over five years while taking share from domestic window and glass suppliers. That top-line momentum has not stopped. What has changed, dramatically, is the company's ability to convert those sales into profit.
The squeeze is coming from several directions at once. Aluminum costs have risen sharply, tariffs are adding expense the company cannot yet fully offset, and a strengthening Colombian peso is inflating the cost base of a manufacturer that produces in pesos and sells in dollars. Management has said it does not expect to fully offset the tariff impact until 2027, which is a long time for shareholders to wait.
The structural wrinkle here is worth understanding. Tecnoglass's historic advantage was labor and manufacturing cost arbitrage — building in Colombia and selling into a high-priced U.S. market. Currency and tariffs attack that advantage directly, and neither is within management's control. The company's recent redomiciling to the United States and a shifting backlog mix beyond its Florida base are also reshaping the cost structure in ways that have yet to fully settle.
The Zacks Rundown
Tecnoglass has been a clear laggard, with shares down roughly 30% year to date and recently trading in the mid-$30s. A Zacks Rank #5 (Strong Sell), TGLS reflects sharply unfavorable earnings estimate revision trends, and the Zacks Consensus Estimate for the current year has been moving lower.
Shares are part of the Zacks Building Products – Miscellaneous industry group, which currently ranks in the bottom 35% out of approximately 250 Zacks Ranked Industries. Stocks in the bottom half of Zacks Ranked Industries face a persistent headwind, and while individual names can outperform a weak group, the industry association tends to cap the size and durability of any rally.
The Zacks Style Scores reinforce the concern. Tecnoglass carries a Growth Score of F, reflecting precisely the dynamic at the heart of this story: a business whose revenue keeps expanding while its earnings go the other way.
Cracks in the Foundation: Record Revenue, Collapsing Earnings
The second quarter, reported back in August, illustrates the problem perfectly. Tecnoglass delivered record revenue of $295.3 million, up 15.6% year over year and well ahead of expectations, alongside a record backlog of roughly $1.4 billion, also up 15.6%. On the surface, an excellent quarter.
Beneath it, profitability deteriorated sharply. Adjusted earnings came in at $0.54 per share against $1.03 in the year-ago quarter — a decline of nearly 48%. GAAP earnings of $0.55 fell 41.5%, net income dropped to $24.6 million, and gross margin compressed to 37.3%. Operating cash flow was just $4.4 million for the quarter, squeezed by tax payments, tariff-related outlays and aluminum pre-purchases. Management also paused share repurchases during the quarter to preserve working capital.
This was not an isolated quarter. Tecnoglass missed the Zacks Consensus Estimate by 9.9% in the third quarter of 2025 and by a steep 26.7% in the fourth, with earnings declining year over year in each.
The forward guidance offers little relief: the company narrowed full-year 2026 revenue guidance to $1.08-$1.12 billion with adjusted EBITDA of $220-$230 million, a midpoint that sits below where analysts had been modeling. More tellingly, management guided third-quarter revenue to roughly $280 million — a sequential decline — explaining that $15-$20 million of residential orders had been pulled forward ahead of May pricing actions. Borrowing from the next quarter to make the current one is rarely a sign of strength.
The estimate picture tells the same story from another angle. Analysts are modeling a year in which Tecnoglass grows sales by double digits but faces a sharp decline in profits. Estimates have continued to drift lower over the past several months. These are precisely the types of negative trends that the bears like to see.
Technical Outlook
TGLS stock has been carving out a well-defined downtrend. Notice how both the 50-day (blue line) and 200-day (red line) moving averages are sloping lower, with shares trading below them and drifting toward the lower end of their 52-week range.
The persistent decline has produced a classic "death cross," wherein the 50-day moving average crosses below the 200-day moving average — a bearish technical signal that often precedes further weakness. Shares would need to mount a serious, high-volume move to the upside and show improving earnings estimate revisions to warrant taking any long positions.
Final Thoughts
A cheap multiple on falling earnings is not the bargain it appears to be, and the estimate revision trend is what drives stock prices over the horizons we care about.
A deteriorating fundamental and technical backdrop show that this stock doesn't deserve a spot in most portfolios right now. With tariff offsets not expected until 2027, aluminum and currency pressures unresolved, and third-quarter revenue guided lower sequentially, this stock should be avoided.
Additional content:
Can McDonald's NEXT Strategy Lift Operating Margin Above +50%?
McDonald's Corp. is targeting an operating margin in the low-to-mid 50% range by 2030 through its newly outlined McDonald's > NEXT strategy. The initiative combines restaurant modernization, technology deployment and simplified operations with efforts to strengthen customer demand.
Restaurant efficiency is a key component of the plan. McDonald's targets approximately 250 basis points of gross restaurant-level efficiency gains as NEXT elements are fully deployed across the United States and International Operated Markets. Initiatives include modernizing restaurant design, simplifying operations and deploying its generative AI-enabled ArchIQ platform at scale. The company estimates that these efficiencies are equivalent to roughly $100,000 in annual cash flow benefits for the average U.S. restaurant, with the majority expected to benefit restaurant profitability over time.
Franchisee investment returns are central to the rollout, as approximately 95% of McDonald's restaurants worldwide are independently owned and operated. The company plans to provide NEXT partnering support through rent relief and capital support, totaling approximately $5 billion by 2030 and $8.5 billion by 2036. McDonald's estimates an approximately four-year payback for franchisees after accounting for this support. Implementation is expected to be tailored to market conditions, with investment priorities guided by franchisee capacity and expected returns.
The productivity program is paired with measurable demand objectives. McDonald's aims to gain 1.5 percentage points of market share in each of the chicken and beverage categories by 2030 while maintaining its beef market share leadership. Nearly 220 million 90-day active loyalty members across 70 markets provide a sizable foundation for more personalized engagement.
Overall, McDonald's NEXT strategy pairs restaurant productivity improvements with efforts to strengthen customer demand. Simpler operations and technology deployment target greater efficiency, while menu innovation, value leadership and improved hospitality are intended to support customer visits. Supported by its scale and franchisee partnering commitments, these initiatives could help McDonald's achieve its operating margin target and free cash flow conversion in the mid-to-high 80% range by 2030.
How MCD's Peers Are Tackling Costs and Margins
Starbucks Corporation is combining operational improvements under its Back to Starbucks strategy with a $2 billion gross cost savings plan through fiscal 2028. Savings span product and distribution costs, operating expenses and general and administrative expenses. In third-quarter fiscal 2026, SBUX's consolidated non-GAAP operating margin expanded approximately 430 basis points year over year to 14.4%, supported by sales leverage, cost savings, lower inflation and tariff refunds.
North America's operating margin improved more than 100 basis points even excluding tariff refunds, as sales leverage and cost savings helped offset investments in Green Apron Service and menu innovation. Starbucks expects its fiscal 2026 consolidated non-GAAP operating margin outlook to be above 11%.
Dutch Bros Inc. is improving service capacity through staffing aligned with customer demand, shop layout refinements and equipment optimization. In second-quarter 2026, company-operated shop contribution margin was approximately 31%, while labor costs as a percentage of company-operated shop revenues declined 120 basis points year over year to 25.4%, primarily due to sales leverage.
Dutch Bros expects approximately 90 basis points of adjusted selling, general and administrative expense leverage for full-year 2026, partially offsetting higher coffee and occupancy costs. BROS' revised full-year adjusted EBITDA guidance of $385 million to $390 million incorporates approximately 20 basis points of year-over-year adjusted EBITDA margin pressure at the midpoint.
MCD's Price Performance, Valuation & Estimates
Shares of McDonald's have declined 21.2% over the past year compared with the industry's fall of 12.4%.
From a valuation standpoint, MCD trades at a forward price-to-sales (P/S) multiple of 5.77, above the industry's average of 2.93.
The Zacks Consensus Estimate for MCD's 2026 earnings per share (EPS) implies a year-over-year rise of 5.6%. The EPS estimates for 2026 have increased in the past 60 days.
MCD's Zacks Rank
MCD stock currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Free: Instant Access to Zacks' Market-Crushing Strategies
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can tap into those powerful strategies – and the high-potential stocks they uncover – free. No strings attached.
Get all the details here >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.