McDonald’s Earnings: Sales Fall in a Challenging Environment, but 2025 Guidance Intact

Key Morningstar Metrics for McDonald’s Corp

• Fair Value Estimate: $308
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Low

What We Thought of McDonald’s Corp’s Earnings

McDonald’s MCD reported first-quarter results that continued to reflect a challenging operating environment for quick-service restaurants. Global comparable sales fell 1%, partly due to Leap Day last year, but also to lower guest counts in the US, which saw a 3.6% decline in comparable sales.

Why it matters: Management expected a decline in QSR industry traffic in most markets, but the magnitude was greater than anticipated, particularly in the US. But we think this reflects near-term turbulence and remain confident in its efforts to restore its value positioning to drive traffic growth.

• Traffic from low- and middle-income consumers was down dramatically, which particularly affects McDonald’s given that it’s overindexed to the former. The ongoing tariff environment weakens consumer confidence, but we think the company can adjust, as evidenced by an improvement in April.
• Management commented that its surveys have pointed to an increase in anti-American sentiment, primarily in northern Europe and Canada. However, no apparent impact on sales has been seen, leaving McDonald’s’ brand intangible asset unaffected, in our view.

The bottom line: We don’t expect a major change to our $308 per share fair value estimate for wide-moat McDonald’s. McDonald’s stock looks fairly valued at this time.

• Management maintained its full-year outlook for net restaurant growth to contribute slightly over 2% to systemwide sales growth and operating margin in the mid- to high-40% range, which lines up with our forecast before the earnings call.
• Despite the difficult environment for QSRs, we think the market recognizes McDonald’s as well-positioned to weather the storm. We see better upside in no-moat Wendy’s. We think the market is underestimating its long-term growth prospects.