One quarter does not make a trend, and even if it does, the stock’s still a valuation concern. It can’t be denied, however, that McDonald’s Corporation (MCD) is serving up more hope for MCD shareholders than it has offered in a long, long time. The world’s largest restaurant chain handily topped earnings estimates for its recently complete fourth quarter, and did so for reasons that seem plenty sustainable.

Time to buy?

Not just yet … not after today’s sizable advance following a 25% rally since September. But after a pullback and perhaps another quarterly report like Q4’s, this drawn-out turnaround story may finally be investment-worthy again.

McDonald’s Q4 Earnings

Last quarter, McDonald’s earned an operating profit of $1.28 per share on sales of $6.34 billion. Both were better than analyst guesses for earnings of $1.23 per share of MCD and a top line of $6.22 billion. And, perhaps just as important, on a constant-currency non-GAAP (operating) basis, earnings were up $0.13 in the fourth quarter … a 10% improvement.

It begs one question of the struggling restaurant chain — how?

Answer: All-day breakfast.

Giving credit where it’s due, it’s unlikely that ’round-the-clock pancakes and Egg McMuffins get the sole credit for the marked growth. Relatively new CEO Steve Easterbrook, who took the helm a little less than a year ago, and his team have been working to shore up several deficiencies left behind by prior CEO Don Thompson. The all-day breakfast menu, unveiled in October, is easily the most noticeable change he and his team have put into place, though, and the effort has paid off.

The aspect of the fourth-quarter numbers that sent MCD shares to record highs on Monday, though, is the same-store sales growth rate. In the United States, they were up 5.7%. Internationally, in established markets same-store sales were up 4.2%, and they grew 3% in less-established, so-called “high growth” markets like Russia and China … places where an all-day breakfast menu doesn’t play the way it does in the U.S.

And more of the same is on the way.

Refranchising Poses Risk

Though some are more enthused than others, the market mostly agrees that Easterbrook is successfully leading the turnaround. The recently created frothy valuation notwithstanding, McDonald’s is once again at least a decent stock to own.

There’s a large but tough-to-perceive headwind blowing, however, that could crimp future results in a way that most investors may not even realize. That headwind? In May of last year, McDonald’s announced it would be re-franchising approximately 3,500 units, meaning McDonald’s aims to sell units currently owned and operated by the company to franchisees who will then simply pay the company an annual fee and a percent of sales … and keep whatever profits are left for themselves.

It’s a double-edged sword. On the one hand, it saves money; now the investment and capital needed to run restaurants is on the shoulders of proprietors rather than on McDonald’s as a corporation. On the other hand, the paradigm shift potentially takes much of the upside of restaurant ownership off the table for the organization.

To offset the shift from being an owner/operator to being a franchisor, McDonald’s has added fees and mandated higher spending from its franchisees … franchisees who are now fiscally struggling because of the rising costs. For instance, last year the company raised the “rent” it charges franchisees, which is a percentage of sales. It also announced an aim to raise the minimum wage for most of its workers to at least $10 per hour.

The pay raise is still being contended, but with that financial overhang looming for proprietors, the company may find it difficult to shed those 3,500 units. Never even mind the growing lack of interest in establishing a new unit. And as was noted, it’s an impasse that could take shape without anybody truly recognizing it.

Bottom Line for MCD

While the growing disinterest in developing an increasingly costly franchise is something all MCD shareholders may want to mentally prepare for, another strong quarter or two could quell those concerns and make a McDonald’s franchise “worth it” again.

And that’s just one of the reasons a would-be investor might want to wait that long before stepping into the stock. It could take another quarter or two for the trailing price-to-earnings ratio of 26 to be whittled down to something more palatable — say, under the 20 level.

All the same, MCD has at least become watch-worthy again. Easterbrook is for real.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.