The McDonald’s Corporation (NYSE: MCD) is an Oakbrook, Illinois based American fast-food chain restaurant, famously known for its hamburgers and French fries. McDonald’s is the world’s largest fast-food chain, serving approximately 68 million customers daily in 119 countries around the world.
McDonald’s In The News
McDonalds reported its third quarter results on Tuesday, October 21 and its results were rather abysmal. This only added to the disappointing year McDonald’s has had so far in 2014. McDonald’s President and Chief Executive Officer Don Thompson said in the report, “McDonald’s third quarter results reflect a significant decline versus a year ago, with our business and financial performance pressured by a variety of factors – from a higher effective tax rate, to unusual events in the operating environments in APMEA and Europe, to under-performance in the U.S., our largest geographic segment. While our ability to withstand these factors is a testament to the Company’s enduring brand and strong financial foundation, by all measures our performance fell short of our expectations.” He continued, “We recognize that we must demonstrate to our customers and the entire McDonald’s System that we understand the problems we face and are taking decisive action to fundamentally change the way we approach our business.”
During its Q3 results, McDonalds reported $1.09 earnings per share on a diluted basis, missing the analysts’ consensus of $1.38 by $0.12. During the same quarter last year, the company posted $1.51 earnings per share. The fast-food chain earned revenue of $6.99 billion for the quarter, missing the analysts’ consensus of $7.20 billion. The company’s revenue for the quarter was down 4.6% on a year-over-year basis. On average, analysts predict that McDonald’s Co. will post $5.35 earnings per share for the current fiscal year.
McDonald’s is still dealing with repercussions from its expired meat scandal in China this past August, a reason that factors into the company’s lackluster quarter. Another reason for the fast-food chain’s abysmal results is due to millennials favoring fresher, healthy fast-food options like Chipotle.
A Financial Expert’s Opinion
On October 21st, Investor Place blogger Dan Burrows named McDonald’s as a stock that has farther to fall before it becomes a Buy. He noted “At some point, MCD stock is a buy, but it needs some multiple compressions first. After all, the competition is growing and stealing market share. That suggests that MCD can fix its problems, but it’s given no reason to see that happening soon.” Burrows has rated McDonald’s 3 times, earning a 67% success rate recommending the stock.
Dan Burrow’s Past Recommendations
Burrows has a fairly extensive portfolio having rated stocks across all sectors, including Facebook (NASDAQ: FB) and eBay (NASDAQ:EBAY), helping him earn an overall success rate of 63% recommending stocks and a +5.7% average return per recommendation.
On October 1st of this year, Burrows named Facebook as a stock to Buy on any pullback. Although the social network is an expensive stock, Burrows reasoned “Facebook’s hot revenue growth ensures that any pullback in FB stock will be short-lived. If anything, it’s a buying opportunity.” Burrows has only rated Facebook once with a 100% success rate recommending the stock.
Separately on September 30th, Burrows called eBay a stock to Sell once its split from PayPal is complete. He explained “ A focused and independent PayPal has a better chance of beating its rivals than does a subsidiary beholden to a bunch of distracted eBay managers…Whatever the outcome, this is the best news anyone holding eBay stock has heard in some time. The only thing to do in the short term is hold on to your stakes until eBay sets PayPal free.” Burrows has only rated eBay once, earning a 100% success rate recommending the stock.
On the other hand, Burrows has not always been correct with his recommendations. On September 24th of this year, Burrows named Tyson Foods (NYSE: TSN) as a stock to Sell in October. He noted, “TSN stock is a stinker in October. Or at least it has been. Over the last ten years, TSN lost an average of 4.4% over the course of the month.” This is the only time Burrows has rated Tyson Foods, earning a 0% success rate recommending the stock.
Dan Burrows covers a variety of stock among all sectors. Do you trust his latest recommendation based on his financial advice history?