Key Takeaways:
McDonald's Corp. (MCD) is scheduled to report first-quarter earnings before the market opens on Thursday, with the fast-food giant’s stock facing pressure after declining 7% year-to-date while the broader market has rallied.
"Sales did jump after Chris Kempczinski's tasting video went viral (say what you will about his small bite and corporate-speak, he sold burgers), but have since waned and will roll off the menu soon," Peter Saleh, an analyst at BTIG, wrote in a note to clients regarding the new Big Arch burger.
Wall Street consensus expects US same-store sales to rise 3.9%, marking a fourth consecutive quarter of growth, though this would be a slowdown from the 7% growth seen in the prior quarter. International markets are projected to grow by 4%. However, the results may be dampened by poor weather, higher beef costs, and the lapping of a successful promotion last year. Adding to investor caution, the company’s earnings date is later than its historical average, a factor that sometimes signals negative news.
Shares of McDonald's have fallen 7% in 2026, sharply underperforming the S&P 500’s 7% gain. The upcoming report will be a critical test of whether new initiatives can reverse the trend, with a miss potentially sending the stock to its lowest point in nearly two years.
With consumers increasingly focused on price, McDonald's has leaned heavily into its value offerings. In early April, the company launched a new menu with items under $3 and a $4 breakfast deal, replacing its previous buy-one, get-one promotions. According to BTIG's Saleh, franchisees believe specific price points will resonate more effectively with customers than BOGO offers, although adoption may take time.
Beyond value, two major product launches are in focus. The Big Arch burger, which launched in March, created significant social media buzz, and analysts are watching to see its impact on sales. More strategically important may be the company's new beverage platform. In late April, McDonald's announced six new specialty drinks, which Saleh believes could drive a mid-single-digit sales lift as the company aims to compete with beverage-focused rivals. "Franchisees are overwhelmingly positive on the platform," Saleh noted.
Despite its recent stock slump, McDonald's financial health remains robust, particularly when compared to competitor Starbucks Corp. (SBUX). While Starbucks reported higher quarterly sales of $9.5 billion to McDonald's $7.01 billion, McDonald's was significantly more profitable, with a net income of $2.16 billion against Starbucks' $510.9 million.
McDonald's also boasts stronger cash flow and a more attractive valuation, with a forward price-to-earnings ratio of 22.09x compared to 51.84x for Starbucks. The company is also a dividend stalwart, just one year shy of becoming a "Dividend King" after raising its dividend for 49 consecutive years. It currently offers a yield of approximately 2.5% with a sustainable payout ratio of about 60.5%.
Analysts remain broadly positive on McDonald's prospects. The stock holds a "Moderate Buy" rating from 36 analysts, with an average score of 3.97 out of 5. Price targets suggest a potential upside of as much as 29.4% over the next twelve months. This optimistic view contrasts with the stock's recent performance, creating a pivotal moment for the company's earnings release.
The Q1 results will be crucial for validating the bullish analyst outlook or confirming the market's recent bearish sentiment. Investors will be closely watching the earnings call on Thursday for management's commentary on consumer trends, cost pressures, and the performance of its new growth initiatives.
This article is for informational purposes only and does not constitute investment advice.
