It was good news for McDonald’s (NYSE:MCD) in Monday afternoon’s trading, as the fast-food giant saw share prices jump over 2% in the session. The biggest catalyst on that gain was an earnings report that defied expectations even as there are potential signs of trouble afoot.
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McDonald’s earnings brought in some decent wins. Earnings per share came in at $3.19, against $3 expected by analyst consensus. Meanwhile, revenue came in at $6.69 billion against analyst projections of $6.58 billion. However, the conditions under which those earnings came in wasn’t exactly welcome news to shareholders; foot traffic at locations was down on average, however, McDonald’s shored up the numbers by engaging in price hikes. Since most other restaurants also raised prices, this allowed McDonald’s to largely preserve one of its key brand metrics: the value provider.
Yet it wasn’t just cheap food that kept shoppers coming back, reports note. It helped that several new menu items fired up in the interim. New sauces showed up on the menu, along with the return of Spicy Chicken Nuggets and the Cheesy Jalapeno Bacon quarter pounder back in July. The combination of wilder spice options plus comparatively low prices gave McDonald’s something of an edge in the field.
McDonald’s CEO Chris Kempczinski noted that, though customers remained “discriminating” in their spending, McDonald’s wasn’t seeing much change among customer acceptance of pricing. That may have been because, ultimately, customers have little choice when everyone is hiking prices. The recent launch of the Free Fries Deal may be helping as well, as the salty snacks tend to draw interest by themselves.
Is It Safe to Invest in McDonald’s?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MCD stock based on 19 Buys and four Holds assigned in the past three months, as indicated by the graphic below. Furthermore, the average MCD price target of $309.96 per share implies 18.47% upside potential.
