Why McDonald's Will Move the Dow Tomorrow

McDonald's reports tomorrow morning. Given the impact that other Dow stocks have had after releasing their earnings, investors should look out for surprises from the fast-food giant.

Jan 22, 2014 at 4:30PM

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Earnings reports have moved the Dow Jones Industrials (DJINDICES:^DJI) sharply in both directions over the past week, with concerns about falling revenue becoming just as important as giving solid results on the bottom line. Tomorrow, McDonald's (NYSE:MCD) joins the list of Dow components reporting quarterly earnings, and given the struggles that the fast-food giant has gone through recently, the index could react strongly in either direction depending on what the company says.

McDonald's typically releases its earnings at about 8 a.m. EST. A conference call will follow at 11 a.m. EST after the market opens.


In preparing for McDonald's earnings, investors should keep several things in mind. Already, investors have readings on a good part of the past quarter, with global same-store sales rising 0.5% in both October and November. Yet the mix of comps was different in both months, with domestic sales rising in October but falling in November. The Asia/Pacific region has been consistently weak, while Europe has done a lot to hold up the company's sales.

Yet McDonald's struggles go well beyond simple same-store sales comparisons. Competition has appeared from numerous areas, with Yum! Brands (NYSE:YUM) making progress in restoring growth to its key Chinese operations after suffering huge sales declines in the wake of avian-flu scares in the emerging-market nation. Elsewhere, rivals like Wendy's (NASDAQ:WEN) and Burger King have come up with menu innovations that have forced McDonald's into a defensive position, and the Golden Arches' efforts to answer with an expanded value menu and other initiatives have resulted in setbacks like its slow-selling Mighty Wings offering.

At the same time, McDonald's has opened a can of worms in seeking growth opportunities. Going after Starbucks (NASDAQ:SBUX) and its coffee empire by offering premium beverages was a brilliant move for McDonald's, but it has also led to operational difficulties, with increases in customer complaints coming as employees are forced to spend extra time preparing those beverages. Similarly, efforts to find higher-price-point items has put McDonald's up against fast-casual companies such as Panera Bread, and those comparisons could prove even more difficult given the different perception that customers have of both companies.

The key to the Dow's response to McDonald's earnings lies in both comps and earnings growth. A sharp rebound in same-store sales could finally support the company's stock after a long period of underperformance. But if McDonald's can't find a way out of its recent pattern, the stock could remain in the doldrums in 2014.

Don't settle for less than the best
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends McDonald's and Starbucks. The Motley Fool owns shares of McDonald's and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers