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McDonald’s (MCD) Stock Price Barely Moved on Q2 Results. What’s Next?

Simon Mugo trader
Updated 26 Jul 2022

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Key points:

  • McDonald’s (MCD) stock price traded sideways on mixed Q2 results.
  • The fast-food chain witnessed growth in the US and internationally.
  • As a result, its earnings surged despite its revenues missing estimates.

The McDonald's Corp (NYSE: MCD) stock price was trading sideways after the international fast-food restaurant released its Q2 earnings results. The company’s results were mixed as its revenues missed expectations, while its earnings beat expectations.

The multinational company generated revenues worth $5.72 billion, representing a 3% decline to Q2 2021, with a majority of the lost revenues being attributed to the closure and eventual sale of its Russian business.

Also read: The Best Undervalued Stocks To Watch In 2022.

On the other hand, McDonald’s earnings (profits) came in at $1.19 billion ($1.60 per share). However, after excluding one-time charges such as a French tax judgement, the company’s EPS soar to $2.55, beating analysts' estimates of $2.47.

The lack of movement in MCD stock price is a telling sign since it shows that investors are not willing to bid up the stock ahead of tomorrow’s interest rate decision by the Federal Reserve. Many expect a 75 basis point hike, but we cannot rule out a 100 basis point hike.

McDonald’s attributed its profitability to higher prices and strong international market growth, offsetting the higher operational costs driven by high oil and food prices. Still, there is a limit to how much consumers are willing to pay for fast-food items, which limits the company’s future price elasticity, especially in the face of record-high inflation.

Demand for the fast-food restaurants' food items grew in Q2, as evidenced by the 3.7% increase in same-store sales, which was better than the 2.8% growth predicted by Street Account, which tracks retail sales in the US.

McDonald’s revealed that some of its customers had been hit by the higher inflation and ordered its lower-priced food items after inflation left them with lower disposable incomes.

However, its international franchises were the main growth driver as sales at its international stores rose 16%, driven by impressive growth in Japan and Brazil. On the other hand, growth in China slowed down due to the strict COVID-19 lockdowns imposed by the government to fight the pandemic.

So, should you buy MCD stock? MCD stock is trading in the upper portion of a wide range. Hence, I would stay away from the stock until it breaks above the upper bound or retests the lower bound of the range.

*This is not investment advice. Always do your due diligence before making investment decisions.

McDonald’s (MCD) stock price.

McDonald's (MCD) stock price 26-07-2022
Source: Tradingview

The McDonald’s (MCD) stock price edged 0.59% higher to trade at $251.85, rising from Monday’s closing price of $250.38.

Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading