McDonald’s (MCD) pulls back to lower rail of upwardly sloped channel after earnings report
McDonald’s (MCD) reported second quarter earnings results back on July 26. The company reported earnings of $2.05 per share on the quarter and that matched the estimates of analysts. Initially the stock moved higher after the report, but it pulled back with the rest of the market over the past week.
Over the last three years, the company has been averaging earnings growth of 15% per year and the second quarter results were up 3% from the previous year. Sales have been declining by 7% per year over the last three years and they were flat in the second quarter of 2019 compared to the second quarter of 2018. The sales results are being impacted by the company’s plans to shift locations from corporate ownership to more franchise status.
Looking at the company’s management efficiency measurements we see a profit margin of 28.3% and an operating margin of 41.8%. I looked at three different sites for a return on equity, but none of them had an ROE for McDonald’s. Regardless, the margins are well above average. It is also worth noting that the company doesn’t have any long-term debt.
As far as valuations for McDonald’s, the P/E ratio is a very reasonable 28.2 and the stock is trading at a discount to its book value.
As far as the technical picture, the stock has performed very well over the last three years. It has been trending higher within a trend channel on the weekly chart and the stock was at the upper rail of that channel ahead of earnings. The more immediate outlook is on the daily chart and it shows how the stock has been climbing in the last six months. Like on the weekly chart, the daily chart shows a trend channel defining the various cycles within the overall trend.
The stock dropped to the lower rail of the channel in the past week and that rail was formed by connecting the lows from February and May.
We also see that the daily stochastic readings dipped down to oversold territory in the past week and made a bullish crossover on August 2. In addition to this bullish signal, the Tickeron overview for McDonald’s shows other bullish signs for the stock.
We this from that overview:
MCD in Uptrend: price expected to rise as it breaks its lower Bollinger Band on July 31, 2019.
This price move signals that MCD may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options. In 22 of 31 cases where MCD's price broke its lower Bollinger Band, its price rose further in the following month. The odds of a continued Uptrend are 71%.
Tickeron’s Trend Prediction Engine also generated a bullish signal for the stock on August 1 and that signal showed a confidence level of 72%. The signal calls for a gain of at least 4% within the next month.
Looking at the sentiment indicators for McDonald’s we see average readings for the stock. There are 31 analysts following the stock and 24 of them have the stock rated as a “buy”. The other seven have the stock rated as a “hold”. With 77% of all ratings being buy ratings, the buy percentage is slightly above average.
The short-interest ratio for the stock is at 2.5 currently with 6.8 million shares sold short and average daily trading volume of 2.78 million. The number of shares sold short-changed very little from the end of June through the middle of July.
MCD's RSI Indicator ascends from oversold territory
The RSI Indicator for MCD moved out of oversold territory on April 17, 2024. This could be a sign that the stock is shifting from a downward trend to an upward trend. Traders may want to buy the stock or call options. The A.I.dvisor looked at 22 similar instances when the indicator left oversold territory. In of the 22 cases the stock moved higher. This puts the odds of a move higher at .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on April 18, 2024. You may want to consider a long position or call options on MCD as a result. In of 96 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
The Moving Average Convergence Divergence (MACD) for MCD just turned positive on April 18, 2024. Looking at past instances where MCD's MACD turned positive, the stock continued to rise in of 51 cases over the following month. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where MCD advanced for three days, in of 334 cases, the price rose further within the following month. The odds of a continued upward trend are .
Bearish Trend Analysis
The Stochastic Oscillator may be shifting from an upward trend to a downward trend. In of 77 cases where MCD's Stochastic Oscillator exited the overbought zone, the price fell further within the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where MCD declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
MCD broke above its upper Bollinger Band on April 23, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
The Aroon Indicator for MCD entered a downward trend on April 19, 2024. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
Fundamental Analysis (Ratings)
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is seriously undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (0.000) is normal, around the industry mean (4.178). P/E Ratio (23.619) is within average values for comparable stocks, (56.238). Projected Growth (PEG Ratio) (1.969) is also within normal values, averaging (2.038). Dividend Yield (0.023) settles around the average of (0.035) among similar stocks. P/S Ratio (7.843) is also within normal values, averaging (3.343).
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 83, placing this stock better than average.
The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. MCD’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
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an operator of food restaurant chain
Industry Restaurants