As McDonald's Turns to Value Meals, Is Now a Good Time to Buy the Stock?

 

POINT

  • McDonald's (NYSE: MCD) recently reported disappointing Q4 earnings, partly due to an E. coli outbreak that impacted sales.
  • The company is shifting its focus towards value meals to attract price-conscious consumers.
  • Despite short-term challenges, McDonald's is expanding aggressively, planning to open 2,200 new stores in 2025.
  • Analysts see long-term growth potential, making it a solid investment for patient investors.

DETAILS

Weak Q4 Performance Due to E. Coli Outbreak

Image source: Getty Images.

McDonald's experienced lackluster Q4 results, mainly due to an E. coli outbreak in the U.S. that forced the company to temporarily remove its Quarter Pounder from some locations. As a result, U.S. same-store sales declined by 1.4%, reflecting lower check sizes but slightly increased guest counts.

However, international markets performed better:

  • International licensed stores: +4.1% same-store sales growth, with strong performance in Japan and the Middle East.
  • International company-operated stores: +0.1%, slightly affected by weakness in the U.K..

Overall, McDonald's global same-store sales rose by 0.4%, beating analyst expectations of a 1% decline. However, total revenue remained flat at $6.39 billion, slightly below the consensus estimate of $6.44 billion.


Aggressive Expansion Plans

Despite a challenging Q4, McDonald's remains confident about long-term growth:

  • Plans to invest $3.0B - $3.2B in new unit development.
  • 2,200 new restaurants in 2025, with 1,000 in China.
  • Overall store count expected to grow by 4%.

Leaning into Value Meals

Facing inflation-driven price hikes in the fast-food industry, McDonald's is doubling down on its value meal strategy to maintain customer traffic.

  • Introduced the McValue platform in the U.S. (Jan 2025).
  • Expanded value meal programs in international markets.
  • Reported strong customer reception for its $5 Meal Deal and "Buy 1 Add 1 for $1" promotions.
  • The company believes that value meals drive additional purchases, with $5 Meal Deal customers averaging a $10+ total check.

Financial Outlook for 2025

McDonald's expects a full sales recovery from the E. coli incident by Q2 2025 and is optimistic about margin improvements:

  • Operating margin forecast: Above 46.3% (higher than in 2024).
  • Potential currency headwind: $0.20 - $0.30 EPS impact due to exchange rate fluctuations.
  • Continued rollout of its "Best Burger" initiative to improve taste and consistency worldwide (to be fully implemented by 2026).

OUTLOOK

McDonald's remains a dominant force in the fast-food industry, and its strategic focus on value meals and expansion should help it capture market share during economic uncertainty. The loyalty program (175 million active users) and digital ordering improvements further enhance its growth potential.

However, risks remain:

  • The company needs to fully recover from its Q4 sales slump.
  • Increased competition from other fast-food chains implementing similar value pricing strategies.
  • Potential margin pressures if value meals fail to drive enough additional sales.

CONCLUSION

✅ Short-term caution due to weak Q4 results, but long-term potential remains strong.
✅ McDonald's value meal strategy should help drive sales and market share growth.
✅ The company’s aggressive expansion and digital transformation offer strong upside for long-term investors.
✅ For investors seeking stable, dividend-paying stocks, MCD remains a solid buy.


💡 Would you consider McDonald's stock a good buy right now? Let us know your thoughts!


SOURCE : https://www.fool.com/

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