McDonald’s (NYSE: MCD) fell in early trading on Tuesday after the fast-food giant’s margin update dampened enthusiasm for strong fourth-quarter comparable sales across all segments.
During the earnings call, McDonald’s ( MCD ) executives warned commodity, utility and labor inflation will continue to drag on margins this year. The chain is also seeing the first signs of decline with its menu selection.
A key takeaway could be that even as sales remain strong, McDonald’s ( MCD ) expects operating margin to be around 45% of sales in 2023 versus consensus of 46.5%.
On Wall Street, Cowen noted that the defensive appeal of McDonald’s ( MCD ) shined in the fourth quarter, with better-than-expected global sales that rose significantly from the third quarter in all three segments. “Within 2023 guidance, the biggest surprise is modestly higher net restaurant growth contributing to higher-than-expected capital costs, as well as higher interest costs driven by higher rates,” analyst Andrew Charles updates.
UBS highlighted the fast-food chain’s strong performance in the US and globally. Analyst Dennis Geiger expects MCD to be well positioned if consumer spending power comes under pressure in the near term due to its favorable discounting characteristics due to its strong focus on everyday value. The company maintained its Buy rating.
Bank of America is more cautious about McDonald’s growth. Analyst Sara Senatore and team continue to expect fairly modest consensus estimate revisions going forward, noting that the franchise is reducing operating leverage to both the downside and upside. BofA also sees valuations at an all-time high. The company has a Neutral rating on MCD.
Explore McDonald’s Q4 earnings report.
Shares of McDonald’s (MCD) fell 2.15% in early trading at $265.13. However, BurgerFi International (BFI) is positive about McDonald’s report in the restaurant sector. +2.75%Shake Shack (SHAK) +2.69%Denny’s (DENN) +1.55%and Wingstop (WING) +1.27% all in positive territory after solid comparable sales readings.