McDonald’s (NYSE:MCD) failed to meet revenue estimates for the first time in four years, blaming its international business.
For the fourth quarter, McDonald’s reported net income of $2 billion, $2.80 per share fully diluted, with revenue of $6.4 billion.
Shares fell about 1.7% over the weekend and fell further once the market opened. MCD stock entered trade this morning at $287.74, a market capitalization of $210 billion and 25 times earnings.
Not Loving It
The miss on revenue was less than 1%, and the company beat earnings estimates by over 4%.
The Israel-Palestine conflict was blamed for the short sales. Other U.S. consumer brands like Starbucks (NASDAQ:SBUX) are also experiencing boycotts due to their perceived roles in the conflict (despite Starbucks having no locations in either Israel or Gaza).
McDonald’s global same-store sales grew 3.4%, but analysts had been hoping for a 4.7% gain. The company’s Israeli licensee decided to offer discounts to Israeli Defence Forces (IDF) soldiers, leading to protests in the Arab world. Some locations had to shut down temporarily. CEO Chris Kempczinski said the war also weakened sales in Malaysia, Indonesia and France.
McDonald’s has been raising prices and, it says, improving its product. Kempczinski said the company will put between $2.5 and $2.7 billion into capital spending this year, with more than half going into new outlets.
The slower-than-expected results could hit the whole market. They hit fears that inflation and rising global tensions will hurt business.
Sentiment on McDonald’s at Stocktwits has turned extremely bearish, with bears pointing to rising prices. Some are also citing the boycott for their sentiment.
Clearly, the war is damaging the reputation of America and American businesses in the region. But it seems the American commitment to Israel is only increasing. The House is set to vote on a supplemental that gives aid to Israel while denying it to Ukraine. The Senate released its own bill this morning that includes aid to Israel, Ukraine, and border security funds. However, both bills seem dead on arrival.
MCD Stock: What Happens Next?
World events are volatile, and thus, the reputation of U.S. brands is volatile. Expect a rocky ride.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
