McDonald’s Moves Higher Despite Missing Q4 Earnings Estimates

McDonald’s Video 29.01.21.

Pandemic Restrictions Continue To Put Pressure On McDonald’s Earnings

Shares of McDonald‘s are gaining ground today despite the disappointing earnings report. In the fourth-quarter, the company recorded revenue of $5.31 billion and adjusted earnings of $1.70 per share, missing analyst estimates on both earnings and revenue.

McDonald’s stated that global comparable sales declined by 1.3% but improved compared to the previous quarter. For the full year, global comparable sales declined by 7.7% due to the negative impact of the coronavirus pandemic.

In the U.S., fourth-quarter comparable sales increased by 5.5% while they remained under pressure in the international segment.

The company will continue to invest in delivery and digital presence as these segments showed significant strength during the pandemic. At this point, it looks like investors are buying the story as the stock is gaining ground despite the disappointing earnings report at a time when S&P 500 is under pressure.

Investors Look Ready To Focus On The Future

While the beginning of mass vaccination program was challenging in most countries which have access to vaccines, investors are still ready to bet that the world will soon get back closer to its normal state.

Meanwhile, McDonald’s managed to quickly adapt to the new realities when in-door dining may be restricted in various countries, and investors believe that current investments in delivery and digital space will pay off in the future.

Currently, McDonald’s is trading at about 25 forward P/E which looks like a reasonable valuation for the current market environment when the company’s valuations are boosted by the unprecedented support provided by the world governments and central banks.

Another round of U.S. stimulus may provide additional support to McDonald’s in the first half of this year as it will certainly boost consumer activity. While the timing and the size of the new package is not clear as Biden’s stimulus plan is facing opposition from Republicans, some stimulus will likely be delivered in the upcoming months which will be bullish for consumer-dependent businesses like McDonald’s.

For a look at all of today’s economic events, check out our economic calendar.