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After several years of price hikes, and amid fierce competition in the quick-service segment, McDonald’s (NYSE:MCD) traffic will likely remain weak, resulting in limited earnings growth, leading Argus to downgrade the stock to Hold from Buy.
McDonald’s (NYSE:MCD) shares have appreciated by 4.3% year-to-date, compared to +3.4% for the ETF that tracks the restaurant industry. Given the high valuation – especially compared to competitors like Darden Restaurants (DRI) and Restaurant Brands (QSR), Argus analyst John Staszak expects MCD shares to mirror the broader market. Additionally, Staszak lowered his FY25 EPS estimate to $12.30 from $13.20 which compares to the consensus estimate of $12.27.
Trading at 24.6x Argus’ FY25 EPS estimate, McDonald’s (NYSE:MCD) is priced above the 22x average and “overly reflect its status as a safe haven,” Staszak says.
Although Staszak is pulling his Buy rating for McDonald’s (MCD), his long-term outlook remains bullish as the company’s geographically diverse locations, share buybacks, and dividend hikes makes the stock a long-term investment.
Shares are lower ahead of Friday’s open, tracking a more defensive broader market.
More on McDonald’s
- McDonald’s: Focus On Value Offerings And New Launches Should Drive Upside
- McDonald’s: A Resilient Compounder For The Long Run
- Mcdonald’s: Super-Sized Prices Drove Customers Away, But A Return To Value Could Boost Sales
- McDonald’s shares end in green breaking seven session losing streak
- McDonald’s premium valuation vulnerable to spending shifts, consumer tastes – Morgan Stanley