What's Happening With McDonald's Stock?

Core Viewpoint - McDonald's stock has remained flat in 2024, significantly underperforming the S&P 500, primarily due to an E. coli outbreak and disappointing Q3 financial results [2][6]. Financial Performance - McDonald's Q3 revenue increased by only 3% year-over-year to $6.9 billion, while net income declined by 3% to $2.3 billion [2][3]. - Same-store sales in the U.S. rose by 0.3%, but globally, they fell by 1.5% in Q3 [2][3]. - The company forecasts revenues of $26.2 billion for fiscal year 2024, reflecting a 3% year-over-year increase [6]. Market Challenges - The E. coli outbreak has negatively impacted McDonald's stock gains for 2024, with the share price reverting to its starting point for the year [2]. - Rising costs have outpaced revenue growth, leading to concerns about pricing power, especially among lower-income customers [4]. - The company anticipates negative traffic in the quick-service restaurant industry in the U.S. for the entirety of 2024 [4]. Strategic Initiatives - McDonald's is focusing on digital and home-delivery services to enhance long-term growth potential [5]. - The company has a forward P/E ratio of 25x, below its five-year average of 28x, indicating potential for long-term growth [5]. Peer Comparison - McDonald's stock performance has been less volatile compared to the S&P 500, with annual returns of 28% in 2021, 1% in 2022, 15% in 2023, and 0% in 2024 [7]. - The management has shifted focus to same-store sales growth, particularly in international markets, as a key metric for success [8].