E Is McDonald's A Revival Story In 2015?

Resignation of McDonald’s USA president Jeff Stratton has surely added to the list of problems being faced by this fast-food giant. Shares of McDonald’s (MCD) have skidded more than 9 percent over the past few months. This is the worst decline the company has seen in over a decade; investors have now started questioning the safety of their investment in MCD.

Burger King (BKW) and Tim Hortons (THI) are the biggest competitors of McDonald’s in the fast-food market and their $12.5 billion merger deal makes them the third largest fast-food company in the world. This deal has intensified competition for McDonald’s, which posted flat global same-store sales in the second quarter of 2014. With same-store sales falling 3.2 percent for US markets, other market segments including Asia-Pacific, Middle East as well as Africa have also shown weak numbers. Followed by labor issues in America and food safety scandals in China, it seems that golden luster of the Golden Arches is fading away. Are MCD shares going to witness rock bottom prices or will the stock regain its sizzle? Most analysts agree that just as in earlier setbacks, McDonald's will be able to ride over this temporary setback.

Poor sales growth has severely affected recent stock prices and has resulted in a poor performance of Standard & Poor’s 500 Restaurants Index. The stock has fallen from $102.0 to $94.0 since May 2014, and this is one of the sharpest declines shareholders have seen in the last decade. Considered to be the largest restaurant company by revenue, the company’s sales have been dwindling over the past year. Numbers for US stores have slumped for the third month in a row, analysts predicted a slump of around 2.6 percent, but domestic numbers have dropped by 3.5 percent. Food scarcity in Asia has hurt McDonald’s revenue in Asia-Pacific region with sales down by 7.3 percent. McDonald’s outlets in Africa and Middle East have also reported bigger than estimated loss in sales. Nearly 32 percent of the revenue McDonald’s earned is from domestic outlets, and the company has been struggling to attract younger crowds. Once a mainstay of McDonald’s business, young diners today are seeking healthier and fresher food chains that offer customized menus. In this space, Chipotle Mexican Grill, Inc. (CMG) is one of the fastest growing names. MCD shares are about 2 percent lower since the start of the year and closed at $94.45 last Friday.

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Lacey Cahr 2 years ago Member's comment

Look like Shazir Mucklai called $MCD a while ago. It's sales are soaring with a nearly 6% increase. Wish I had listen then but I am following you now.

money.cnn.com/.../index.html

Clark Winslow 3 years ago Member's comment

What other stocks do you recommend?

John Fitch 3 years ago Member's comment

Agree with you here Shazir. I think McDonald's rebounds to reclaim past highs in the $100's. It is a powerful global brand that is not disappearing any time soon. The healthy food revolution is definitely a detriment to MCD's revenue, however, I expect McDonald's to start rolling out more and more healthy alternatives.

Joel Santiago 3 years ago Member's comment

I agree. McDonalds is poised for a major comeback!