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NYSE: McDonald’s share price and Q4 earnings results preview


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What to expect and how to trade McDonald’s upcoming results

A significant earnings miss from Goldman Sachs has prompted a 1.1% drop in  the DJIA overnight, as the index's second-largest weightage failed to meet  already low market expectations. | IG SGSource: Bloomberg
 

 Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Wednesday 18 January 2023 

When are McDonald’s results expected?

McDonald’s is set to release its fourth quarter (Q4) 2022 results on 31 January 2023, a date which still needs to be confirmed at the time of writing. The results are for the fiscal quarter ending December 2022.


What is ‘The Street’s’ expectation for the Q4 2022 results?


Wall Street’s expectations for the upcoming results are as follows:

Revenue of $5,679 billion : -5.5% year on year (YoY)

Earnings per share (EPS): $2.44 (9.32% YoY)

‘The Street’ expects McDonald's to once again beat earnings, as it has done over the previous two quarters when it topped estimates by over 4%.

Several analysts recently upwardly revising their estimates for McDonald’s on the back of its CEO Chris Kempczinski’s early January letter to company staff announcing that he intends to slash many of the burger giant’s 200,00 world-wide corporate jobs as early as April 2023 in order to streamline the business amid high inflation and the risk of a global recession.

McDonald’s analysts PNGSource: Refinitiv


Refinitiv data shows a consensus analyst rating of ‘buy’ for McDonald’s – 10 strong buy, 20 buy and 10 hold - with the median of estimates suggesting a long-term price target of $295.00 for the share, nearly 8% higher than the current price (as of 18/01/2023).

Positive estimate revisions can be interpreted as a sign of optimism about the company's business outlook as its CEO is also set on speeding up the rate of new restaurant openings in order to help the business grow and cater to growing demand as fast food restaurants tend to do well during times of economic gloom as people try to save money.

Looking closer at the numbers, McDonald's currently has a Forward P/E ratio of 25.73 which represents a premium compared to its industry's average Forward P/E of 21.89.

How to trade McDonald’s into the results

IG sentiment data shows that 46% of clients with open positions on the share (as of 18 January 2023) expect the price to rise over the near term, while 54% of clients expect the price to fall.

68% of clients who trade the share bought it this month and 83% this week.

McDonald’s IG PNGSource: IG

McDonald’s share price – technical view

The McDonald’s share price made a new record high at $281.67 in November of 2022 before slipping back to its early January low at $259.51 from where it has recovered, so far back to its current January peak at $273.42.

McDonald’s monthly chartSource: Tradingview


Provided that the November-to-January decline has run its course, meaning as a long as the $259.51 early January low holds, an advance towards the December and all-time high at $279.90 to $281.67 is on the cards with the minor psychological $300 mark representing a possible further upside target for 2023.

Since the correction from the all-time high looks like an Elliott Wave zig-zag correction, the odds favour further upside over the coming days and weeks.

McDonald’s daily chartSource: Tradingview


From a purely technical perspective, short-term traders who are long the stock might consider using a daily close below $259.51 as a stop loss for their trade whereas traders who are short may wish to place their stop loss above the $281.67 November record high.

Summary


McDonald’s is set to release Q4 2022 results on 31 January 2023 (to be confirmed)

Q4 2022 results are expected to show a YoY fall in revenue by around -5.5% but an over 9% rise in EPS

Revenue is expected to be boosted by increased demand as fast food restaurants tend to do well during times of economic gloom as people try to save money.

Long-term broker consensus suggests the share to currently be a ‘buy’, with a median price target of $295.00
Only 46% of IG’s clients with open positions are long the share but an increasing number of clients are buying it, 68% this month and 83% this week.

The McDonald’s share price has come off its November 2022 all-time high at $281.67 in what looks like an Elliott wave zig-zag correction to its early January $259.51 low, pointing towards further upside towards the $300 mark likely to be seen in 2023 as long as the current January low underpins.

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