McDonald's Upside Looks Thin As Traffic Cools

Core Insights - McDonald's Corporation reported solid global comparable sales and loyalty momentum in Q3, but underlying growth slowed, and company-operated restaurant sales declined, impacting overall results [1] - The company reaffirmed its 2025 outlook, expecting net restaurant unit expansion to contribute slightly more than 2% to Systemwide sales growth in constant currencies [1] Sales and Consumer Trends - U.S. quick-service traffic for consumers earning under $45,000 fell by nearly double digits, while higher-income guests showed double-digit gains, partially offsetting the decline [3] - Management highlighted higher rent, food prices, and childcare costs as significant headwinds, along with reduced SNAP benefits adding pressure on consumers [3] Analyst Perspectives - BTIG analyst Peter Saleh expressed concerns about the consumer backdrop, predicting continued pressure on earnings and reiterated a Neutral rating on the stock [2] - Saleh noted that the strains on lower-income consumers are not transitory and may extend into 2026 [3] Margin Pressures - McDonald's is heavily discounting and subsidizing franchisees to drive sales, with management expecting about $75 million in fourth-quarter support to cover half of the Extra Value Meal discounts [5] - Saleh estimated an earnings impact of roughly eight cents per share due to these discounts [5] Future Outlook - The company is expected to roll out CosMc's beverages next year after successful tests, but the analyst sees less opportunity for earnings upside and a more normalized sales trend [5][6]