Amidst Q4 Revenue Estimate, $MCD is Up 2.86% Premarket Trading

McDonald’s (NYSE: MCD), the global fast-food giant, delivered a mixed bag of results in its Q4 CY2024 earnings report. While the company missed both revenue and earnings estimates, the stock surged nearly 2.86% in premarket trading, defying expectations. This paradoxical reaction highlights the interplay between technical and fundamental factors driving investor sentiment.

Revenue and Earnings Miss
McDonald’s reported Q4 revenue of $6.39 billion, falling short of Wall Street’s $6.46 billion estimate. This represents flat year-over-year growth and a 1.1% miss. Adjusted earnings per share (EPS) of $2.83 also came in 1% below the consensus estimate of $2.86. While the company maintained strong profitability, with an operating margin of 44.9% (up from 43.7% in the prior year), the revenue and EPS misses raised concerns about its growth trajectory.

Comparable Sales
Global comparable sales grew by 0.4%, beating expectations of a 0.41% decline. However, U.S. comparable sales dropped 1.4%, worse than anticipated. This decline was partly attributed to an E. coli outbreak in October, which impacted traffic in several states. Additionally, McDonald’s has faced criticism for raising prices too aggressively, alienating budget-conscious consumers. In response, the company has rolled out value-centric deals and promotions to win back customers.

Long-Term Growth Strategy
Despite the short-term challenges, McDonald’s remains committed to its "Accelerating the Arches" strategy, which focuses on expanding market share and driving operational efficiency. Chairman and CEO Chris Kempczinski emphasized that this strategy is delivering results, even as the company navigates macroeconomic headwinds and shifting consumer preferences.

Strong Full-Year Performance
For the full year 2023, McDonald’s posted revenue of $25.49 billion, a 9.97% increase from the previous year. Earnings surged 37.09% to $8.47 billion, underscoring the company’s ability to maintain profitability despite inflationary pressures and competitive challenges.

Technical Analysis
Despite the negative revenue and earnings reports, MCD’s stock price is trading within a bullish reversal pattern. Here’s what the technicals suggest:

Immediate Support: The stock is finding support at the 38.2% Fibonacci retracement level, a critical technical indicator that often acts as a floor during pullbacks.

- Resistance Point: The resistance lies just ahead of the 1-month high. A breakout above this level could sustain the bullish rally, potentially pushing the stock toward target of $319.58 (an 8.59% upside from current levels).

Momentum Indicators
The stock’s 2.48% gain at the time of writing indicates strong buying interest, despite the weak fundamentals. This suggests that traders are focusing on the company’s long-term growth potential and its ability to navigate short-term challenges.

#Market Sentiment
Analysts remain bullish on MCD, with an average rating of "Buy" and a 12-month price target implying significant upside. The stock’s resilience in the face of disappointing earnings reflects confidence in McDonald’s ability to execute its strategy and deliver value to shareholders.


Conclusion
McDonald’s Q4 results may have fallen short of expectations, but the stock’s rally reflects a broader narrative of resilience and long-term growth potential. While the U.S. market remains a challenge, the company’s global footprint, improving margins, and strategic initiatives position it well for future success.