This Is Not the Time to Buy Mickey D's

McDonald's (NYSE: MCD  ) shareholders went through a phase where they weren't "lovin'" the fast food giant's stock price as much as they were several years ago. Mickey D's long progression of amazing financial performance over years' time has slowed. Today, McDonald's watchers got a serving of "less bad" same-store sales data, but remember: the stock's recent appreciation may be too much, too soon.

Same-store sales at the Golden Arches fell 1.5% in February, and although that's a negative number, it's better than the 1.63% decline analysts had expected.

The U.S. is a serious area for concern right now, given macroeconomic uncertainty and signs that many American consumers are feeling pinched. Wal-Mart's (NYSE: WMT  ) recent leaked emails about a scary drop in shoppers' traffic and spending recently could certainly haunt McDonald's. These two consumer giants peddle cheap products, and they share some similar customers whose budgets have been constrained by higher gas prices and issues like the payroll tax hike, which particularly hurts those with lower incomes.

Along those lines, in the U.S., McDonald's same-store sales fell 3.3% last month, and again, that may be a tad better than analysts' estimates for a 3.55% decline but it's still not what could be particularly called good.

For a while there, McDonald's shares had tanked, and much of the weakness likely had to do with the company's very difficult comparisons to past victorious years. On the other hand, longtime CEO Jim Skinner retired last summer, handing over the reins to Don Thompson, who has been trying to follow a pretty tough act.

Anybody who wanted to get in on this stock on the cheap missed the boat, particularly given current economic uncertainties, including whether the management transition has been smooth. Therefore, its share price price recovery now seems ahead of itself.

Right now, the fast food giant doesn't look like an appetizing stock buy given its "less bad" news. Although it's trading at 15 times forward earnings, which is far cheaper than Wendy's (which has a whopping forward price-to-earnings ratio of 27) and Burger King (forward P/E of 20), McDonald's recent numbers and the macro environment don't make it a screaming buy right now.

At this point, quick-serve restaurant stocks like Chipotle (NYSE: CMG  ) and Panera (NASDAQ: PNRA  ) look like more appetizing buys. These two companies have greater growth opportunities and serve many customers whose financial positions are likely more stable, and their meals are by no means outrageously priced even while they provide higher-quality fare than one gets at many fast-food joints.

Chipotle and Panera don't even look that overvalued compared to the restaurant stocks named above, particularly given the aforementioned growth opportunities. Chipotle trades at 27 times forward earnings, and Panera trades at just 20 times forward earnings.

McDonald's shares are inching up today, but investors shouldn't be too quick to accept "less bad" as all that good, particularly without taking the macroeconomic environment into consideration. I'd wait for better, more bargain-priced days to get McDonald's shares.

After making investors rich in 2011, McDonald's was one of the worst-performing blue chip stocks of 2012. Our top analyst on the company will tell you whether you should be worried by this trend, and he'll shed light on whether McDonald's is a buy at today's prices. Click here now to read our premium research report on the company.


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  • Report this Comment On March 08, 2013, at 11:00 PM, pmlang37 wrote:

    Same-store sales at the Golden Arches fell 1.5% in February -- but February had 3.4% less days than last year! That means that same-store sales per day in fact were UP about 1.9%.

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