McDonald’s (MCD) stock has proven highly resilient in recent weeks against the broader market’s brutal sell-off, once again reminding us of its safe compounder status. While the fast-food goliath is dealing with inflation headwinds and shifts in consumer spending, it recently celebrated all-time record revenues and earnings. Even as the stock hovers near its 52-week highs, I think it remains reasonably valued, given the company’s proven strength, overall outlook, and unique qualities.
Given the confluence of factors underpinning MCD stock combined with sustained bullish momentum over the past five years, I’m bullish on the stock.
McDonald’s faced a challenging environment last year, contending with macro and industry-specific setbacks. Notably, inflation and tighter household budgets squeezed consumer spending, especially among low-income families. In a public statement, McDonald’s management noted they were “struggling to get low-income consumers back into stores despite expanding discounts” following a revenue slump. Meanwhile, in the United Kingdom, one of McDonald’s most significant international markets, customer traffic weakened, with management acknowledging that Britain was among its most “challenged” regions as lower-income Brits were switching to other fast food alternatives.
Adding to these pressures was an E. coli outbreak in the U.S. that hit the chain in the fall of 2024, linked to contaminated toppings on its quarter-pounder burgers. McDonald’s swiftly removed the contaminated ingredients and reassured customers, but the incident dented late-year sales, as U.S. comparable sales fell 1.4% in Q4. For investors, this is rather worrying because this decline marked the steepest drop since the pandemic, as many customers avoided McDonald’s products during the scare.
And yet, even in the face of these headwinds, McDonald’s managed to keep the ship steady through the storm. The company celebrated record-high sales and EPS for 2024. System-wide sales reached $26 billion, a modest 2% rise that nevertheless marked an all-time high, while EPS climbed 8.2% to a record $12.33.
A major driver was the momentum of its loyalty program and digital platform. Indeed, McDonald’s reported about $30 billion in systemwide sales from loyalty members for the year, an uptick of 30%. By year-end, it had over 175 million active rewards users globally, up 15%, which goes to show how its mobile app and rewards deepen customer engagement.
