Stock of the Day
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McDonald's (MCD)
McDonald's Reports Another Strong Month of Sales
During these tough times where every dollar counts, some companies continue to surprise Wall Street quarter after quarter. McDonald's has definitely been one of those companies. The world's largest restaurant company reported that global sales rose 5.1 percent in May. The results surpassed analysts' expectations and proved that the company can deliver in bad times. How is the company able to beat analysts' expectations time after time? Can McDonald's continue on this golden path or will this streak come to an end?
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| Stock Analysis |
Over the last few quarters McDonald's has continued to wow investors with their results. Some investors are still scratching their heads wondering how the company is able to deliver when consumers continue to trim unnecessary expenses including eating out. The answer is quite simple. McDonald's is able to deliver what consumer want. The most important factor is that the company is able to deliver the price that consumers want. The company watched demand for their quick and cheap dollar menu items skyrocket during the heart of the recession. Instead of spending $25 on dinner, consumers started spending less than $10. More recently, the company's McCafe line of espresso-based drinks helped sales in the U.S. during the last quarter. McDonald's conducted an expansive advertising campaign for the new products and chose to price the drinks well below its competitor's pricing.
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McDonald's over-saturated presence in countries across the world has also contributed to the company's ability to deliver positive results. It's hard to go anywhere now and not find at least one McDonald's within a few miles. A stronger dollar has hurt overseas sales, but not enough to send sales into negative territory. Sales rose 7 percent in constant currencies. Luckily for McDonald's, fast-food restaurants generally have held up better in a tough economy than higher-priced sit-down restaurants. All these factors combined have provided McDonald's with the necessary means to thrive during tough times. Can the company really continue to deliver these results in the near future?
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The answer is most likely yes. The recession may be slowing, but it is definitely not over. Consumers are still seeking out the best price so McDonald's focus will have to be satisfying consumers' tight pockets. The company will also have to keep a close eye on foreign-exchange rates that could possibly cause undesirable results. Despite continued monthly same-store sales gains, shares of MCD are down 3.7% year-to-date. Shares fell 37 cents to $59.87 during trading on Friday, June 5.
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Profile |
Click here to view a detailed profile of McDonald's.
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