Hard times can be good times for companies that innovate and adapt to customers’ new needs. And when it comes to dining out, people are looking for value.
McDonald’s (MCD) is the poster child for this. Same-store sales and profits are zooming ahead, as cash-strapped consumers look to stretch every dollar. Growth is no longer dependent on new stores, but rather on getting regulars to come back more often.
The company has been able to maintain, and even slightly increase its monthly sales results, despite the tepid economy and effect of the declining U.S. dollar on its global sales.
McDonald’s Earnings Play
MCD reports before the bell on Wednesday, and options traders appear to be betting against a good earnings report. The stock’s put/call ratio has been on the rise ahead of this week’s report, with puts piling up in the option pits — just as they usually do before an MCD price breakout.
Fewer than half the analysts covering MCD rate it a buy, so look out for a flurry of upgrades this week. (Learn 12 Keys to Trading Earnings for Profits.)
This will likely be the FIFTH earnings season in a row that McDonald’s trounces expectations. Its monthly sales results are up, dividends, which were recently hiked, have been up for 32 years in a row, and total shareholder return is 6.7% since 1998.
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MCD has been in the process of breaking above the trend set by its 50-day moving average, and this type of activity typically attracts intermediate-term traders and investors into the market to boost share prices higher.
Investors generally have been more interested in high-volatility stocks during this rally, leaving MCD plodding behind the parade. But as the rally runs into a wall, consistency looks attractive again.
Now is the perfect tine to load up on bullish calls in MCD ahead of this earnings announcement, which is likely to surprise the Street and send the stock up. I particularly like the McDonald’s May 55 Calls (MCDEK) up to $2.75.
Don’t sit back and let profits slip through your fingers this earnings season. You can get specific recommendations from Chris Johnson, complete with buy and sell instructions, by signing up for Winning Edge today.
Chris Johnson is the co-editor of The Winning Edge trading service designed to help you make options profits around corporate earnings and other market events. For more information about Chris, read his bio here.
