McDonald’s Corporation (MCD) has been having a pretty good 2015, all told. Shares of MCD stock were already up by double digits before the recent Q3 earnings report. And now that McDonald’s has posted a beat on both the top and bottom lines, the lift for MCD stock should continue.
The details are undeniably encouraging. Same-store sales increased 0.9% in the U.S. against a forecast of a small decline, and global same-store sales were up 4% last quarter.
As I said a few days ago in an earnings preview, the numbers from this report were make-or-break data for MCD stock holders. While the momentum has been good, McDonald’s boasts a forward price-to-earnings ratio of over 20 coupled with a share price that had been mostly range-bound for the past three years (backing out the past few weeks).
It’s natural to doubt a stock like that.
But it now looks like changes for the better are taking hold for MCD stock. In January, McDonald’s saw a CEO change; in August, McDonald’s announced store closures to reduce its U.S. footprint for the first time in 40 years; and, of course, breakfast is served all day.
Some MCD stock investors may doubt this recent uptrend. After all, McDonald’s is coming out of at least seven straight quarters of same-store-sales declines in the U.S., and the all-day breakfast pop isn’t going to last forever.
And while the sales recovery in China is nice, the backdrop of uncertainty there persists and makes any rebound hard to believe in as a durable trend.
But the U.S. strength is what counts.
Click to Enlarge Shares are now at an all-time high and have a tremendous uptrend on their side based on the charts. MCD stock is above both short-term and long-term moving averages, and the much-touted launch of all-day breakfast that just started out is sure to boost comps in the current quarter, too.
Look, nobody thinks McDonald’s is perfect. There are serious brand challenges amid healthy and fresh options from fast-casual chains like Panera (PNRA) and Chipotle (CMG) that are gaining popularity. Furthermore, MCD has very upset franchisees who see the parent as a corporate culture out of step with the basics of the business. As the front line of McDonald’s, it’s crucial for the company to get its local representatives in line with the long-term mission.
But the next few months should be undoubtedly strong for MCD, and investors can have faith in this stock as it enters 2016 with the wind at its back … and the hopes of all-day breakfast to brighten its future.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.
