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McDonald's Stock Up 17% in a Month: Is the Rally Built to Last?
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Key Takeaways
McDonald's shares surged 17% in a month, outperforming the industry and the S&P 500.
Value deals, specialty beverages and McDonald's NEXT aim to drive traffic and growth.
Rising food costs, consumer pressures and execution risks could limit further upside.
McDonald's Corporation (MCD - Free Report) has staged a strong rally, with its shares gaining 16.6% over the past month. The stock has outperformed the Zacks Retail-Restaurants industry, which advanced 15% during the same period, and the S&P 500, which declined 4.5%. Among its peers, Starbucks (SBUX - Free Report) gained 19.5%, Domino's Pizza (DPZ - Free Report) rose 11% and Restaurant Brands International (QSR - Free Report) advanced 7.6%.
The recent rally reflects growing optimism about McDonald's efforts to revive its U.S. business, strengthen customer value and unlock new growth opportunities. However, persistent consumer pressures, execution challenges and elevated food costs remain concerns. The company's latest earnings call offers insight into whether the recovery can sustain its momentum.
Price Performance
Image Source: Zacks Investment Research
MCD's U.S. Business Shows Signs of Improvement
McDonald's third-quarter 2026 performance highlighted a gradual recovery in its domestic business. Global comparable sales increased 1.5%, while systemwide sales grew 4% in constant currency. U.S. comparable sales declined 0.2% for the quarter but improved as the period progressed, turning positive in September after slightly negative results in July and August.
Management attributed the improvement to several initiatives, including the restoration of selected digital offers, increased marketing support for value platforms and stronger restaurant-level execution. Offers such as a $2 breakfast sandwich and free fries with a $1 minimum purchase helped improve customer traffic.
The company is also working to strengthen its entry-level value proposition. McDonald's has begun an eight-week test of affordable menu bundles across approximately 1,900 U.S. restaurants, while franchisees representing another 4,000 locations have adopted similar initiatives. The company aims to introduce a nationwide program in early 2027.
These efforts could help McDonald's attract budget-conscious consumers and improve traffic trends. However, management acknowledged that it still needs to restore consistent U.S. business momentum.
Specialty Beverages and McDonald's NEXT Offer Growth Potential
McDonald's specialty beverage platform is emerging as an important growth driver. The company reported strong customer uptake and repeat purchases, with transactions including specialty beverages generating checks approximately 50% higher than the average daily check.
More than half of specialty beverage occasions in the United States occur after lunch, helping drive incremental visits during relatively quieter periods. The younger customer base also provides an opportunity to strengthen brand engagement.
McDonald's plans to expand its specialty beverage offerings across nearly all European markets by mid-2027. Management aims to capture an additional 1.5 percentage points of beverage market share by 2030.
Beyond beverages, its McDonald's NEXT strategy focuses on improving food quality, customer experience, restaurant efficiency and digital capabilities. Initiatives include hand-breaded chicken testing, restaurant remodels and ArchIQ, its smart ordering system. These investments could support long-term growth and productivity, although execution will be critical.
International Markets and Earnings Support the Outlook
McDonald's international operations continue to provide stability. Comparable sales increased 1.4% in international operated markets, supported by Australia and Germany. International developmental licensed markets posted 4.2% comparable sales growth, with Japan leading performance.
The company's adjusted earnings per share reached $3.57 in the third quarter, increasing 11% year over year on a constant-currency basis. McDonald's generated nearly $4.2 billion in restaurant margins during the quarter. Its year-to-date adjusted operating margin stood at 48.3%, benefiting partly from refranchising gains.
Management remains on track to achieve the target of having 98% of its global restaurant portfolio franchised by the end of 2028. The company expects approximately 2,100 net restaurant openings globally in 2026, supporting its longer-term expansion strategy.
Nevertheless, international performance is not without challenges. France continues to underperform, while geopolitical disruptions and a softer consumer environment in Europe are weighing on results. China's challenging macroeconomic backdrop is another concern.
What Could Limit Further Upside in MCD Stock?
Despite the encouraging developments, McDonald's faces several headwinds. The company expects mid-single-digit food and paper inflation in 2027, which could pressure restaurant profitability and complicate pricing decisions.
Management emphasized the need to balance inflation-driven price increases with affordability. The company has acknowledged that its value offerings need further improvement, particularly for lower-income consumers.
Moreover, the U.S. recovery remains in its early stages. Although baseline traffic trends improved in September and October, management has not explicitly indicated that fourth-quarter U.S. comparable sales will improve from the third-quarter level.
The success of the entry-level value tests, digital offers and McDonald's NEXT initiatives will be important in determining whether the recent improvement translates into sustained growth.
McDonald's Earnings & Revenue Outlook
MCD’s earnings estimates for 2026 and 2027 have trended upward and downward, respectively, in the past 30 days. The revised estimates for 2026 and 2027 imply year-over-year growth of 5.8% and 5.5%, respectively.
Image Source: Zacks Investment Research
Revenue growth is expected to remain positive, although the pace may moderate. The Zacks Consensus Estimate projects revenues of $28 billion for 2026 and $28.44 billion for 2027, reflecting year-over-year growth of 4.2% and 1.6%, respectively.
MCD Stock Trades at a Discount
McDonald's shares appear relatively inexpensive compared with the restaurant industry based on the forward 12-month price-to-earnings (P/E) ratio. MCD currently trades at 20.37X forward earnings, below the industry average of 22.96X. In comparison, Starbucks, Domino's Pizza and Restaurant Brands trade at forward P/E multiples of 33.45X, 15.98X and 17.53X, respectively.
P/E (F12M)
Image Source: Zacks Investment Research
Is MCD Stock a Buy After Its Recent Rally?
McDonald's improving U.S. business trends, resilient international operations and long-term growth initiatives support its outlook. MCD’s strong franchise model and specialty beverage expansion offer opportunities for sustained growth. However, persistent consumer pressures, rising food costs and execution challenges warrant caution.
MCD currently carries a Zacks Rank #3 (Hold), reflecting a balanced outlook. While the recent rally highlights improving investor sentiment, further upside will likely depend on the company's ability to strengthen traffic, sustain earnings growth and execute its turnaround strategy.
View the Zacks #1 Rank List
Image: Bigstock
McDonald's Stock Up 17% in a Month: Is the Rally Built to Last?
Key Takeaways
McDonald's Corporation (MCD - Free Report) has staged a strong rally, with its shares gaining 16.6% over the past month. The stock has outperformed the Zacks Retail-Restaurants industry, which advanced 15% during the same period, and the S&P 500, which declined 4.5%. Among its peers, Starbucks (SBUX - Free Report) gained 19.5%, Domino's Pizza (DPZ - Free Report) rose 11% and Restaurant Brands International (QSR - Free Report) advanced 7.6%.
The recent rally reflects growing optimism about McDonald's efforts to revive its U.S. business, strengthen customer value and unlock new growth opportunities. However, persistent consumer pressures, execution challenges and elevated food costs remain concerns. The company's latest earnings call offers insight into whether the recovery can sustain its momentum.
Price Performance
Image Source: Zacks Investment Research
MCD's U.S. Business Shows Signs of Improvement
McDonald's third-quarter 2026 performance highlighted a gradual recovery in its domestic business. Global comparable sales increased 1.5%, while systemwide sales grew 4% in constant currency. U.S. comparable sales declined 0.2% for the quarter but improved as the period progressed, turning positive in September after slightly negative results in July and August.
Management attributed the improvement to several initiatives, including the restoration of selected digital offers, increased marketing support for value platforms and stronger restaurant-level execution. Offers such as a $2 breakfast sandwich and free fries with a $1 minimum purchase helped improve customer traffic.
The company is also working to strengthen its entry-level value proposition. McDonald's has begun an eight-week test of affordable menu bundles across approximately 1,900 U.S. restaurants, while franchisees representing another 4,000 locations have adopted similar initiatives. The company aims to introduce a nationwide program in early 2027.
These efforts could help McDonald's attract budget-conscious consumers and improve traffic trends. However, management acknowledged that it still needs to restore consistent U.S. business momentum.
Specialty Beverages and McDonald's NEXT Offer Growth Potential
McDonald's specialty beverage platform is emerging as an important growth driver. The company reported strong customer uptake and repeat purchases, with transactions including specialty beverages generating checks approximately 50% higher than the average daily check.
More than half of specialty beverage occasions in the United States occur after lunch, helping drive incremental visits during relatively quieter periods. The younger customer base also provides an opportunity to strengthen brand engagement.
McDonald's plans to expand its specialty beverage offerings across nearly all European markets by mid-2027. Management aims to capture an additional 1.5 percentage points of beverage market share by 2030.
Beyond beverages, its McDonald's NEXT strategy focuses on improving food quality, customer experience, restaurant efficiency and digital capabilities. Initiatives include hand-breaded chicken testing, restaurant remodels and ArchIQ, its smart ordering system. These investments could support long-term growth and productivity, although execution will be critical.
International Markets and Earnings Support the Outlook
McDonald's international operations continue to provide stability. Comparable sales increased 1.4% in international operated markets, supported by Australia and Germany. International developmental licensed markets posted 4.2% comparable sales growth, with Japan leading performance.
The company's adjusted earnings per share reached $3.57 in the third quarter, increasing 11% year over year on a constant-currency basis. McDonald's generated nearly $4.2 billion in restaurant margins during the quarter. Its year-to-date adjusted operating margin stood at 48.3%, benefiting partly from refranchising gains.
Management remains on track to achieve the target of having 98% of its global restaurant portfolio franchised by the end of 2028. The company expects approximately 2,100 net restaurant openings globally in 2026, supporting its longer-term expansion strategy.
Nevertheless, international performance is not without challenges. France continues to underperform, while geopolitical disruptions and a softer consumer environment in Europe are weighing on results. China's challenging macroeconomic backdrop is another concern.
What Could Limit Further Upside in MCD Stock?
Despite the encouraging developments, McDonald's faces several headwinds. The company expects mid-single-digit food and paper inflation in 2027, which could pressure restaurant profitability and complicate pricing decisions.
Management emphasized the need to balance inflation-driven price increases with affordability. The company has acknowledged that its value offerings need further improvement, particularly for lower-income consumers.
Moreover, the U.S. recovery remains in its early stages. Although baseline traffic trends improved in September and October, management has not explicitly indicated that fourth-quarter U.S. comparable sales will improve from the third-quarter level.
The success of the entry-level value tests, digital offers and McDonald's NEXT initiatives will be important in determining whether the recent improvement translates into sustained growth.
McDonald's Earnings & Revenue Outlook
MCD’s earnings estimates for 2026 and 2027 have trended upward and downward, respectively, in the past 30 days. The revised estimates for 2026 and 2027 imply year-over-year growth of 5.8% and 5.5%, respectively.
Image Source: Zacks Investment Research
Revenue growth is expected to remain positive, although the pace may moderate. The Zacks Consensus Estimate projects revenues of $28 billion for 2026 and $28.44 billion for 2027, reflecting year-over-year growth of 4.2% and 1.6%, respectively.
MCD Stock Trades at a Discount
McDonald's shares appear relatively inexpensive compared with the restaurant industry based on the forward 12-month price-to-earnings (P/E) ratio. MCD currently trades at 20.37X forward earnings, below the industry average of 22.96X. In comparison, Starbucks, Domino's Pizza and Restaurant Brands trade at forward P/E multiples of 33.45X, 15.98X and 17.53X, respectively.
P/E (F12M)
Image Source: Zacks Investment Research
Is MCD Stock a Buy After Its Recent Rally?
McDonald's improving U.S. business trends, resilient international operations and long-term growth initiatives support its outlook. MCD’s strong franchise model and specialty beverage expansion offer opportunities for sustained growth. However, persistent consumer pressures, rising food costs and execution challenges warrant caution.
MCD currently carries a Zacks Rank #3 (Hold), reflecting a balanced outlook. While the recent rally highlights improving investor sentiment, further upside will likely depend on the company's ability to strengthen traffic, sustain earnings growth and execute its turnaround strategy.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.