Please ensure Javascript is enabled for purposes of website accessibility

Why McDonald's Corp. Stock Jumped Today

By Jeremy Bowman – Updated Apr 25, 2017 at 3:56PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Golden Arches popped after an impressive first-quarter earnings report.

What happened

Shares of McDonald's Corp. (MCD -1.81%) moved higher Tuesday after the fast-food giant delivered a surprisingly strong first-quarter earnings report.

As of 3:21 p.m. EDT, the stock was up 5.4%.

A McDonald's restaurant on a street corner

Image source: Motley Fool.

So what

McDonald's shares reached a new all-time high above $140 as the company easily cleared analysts' estimates on both top and bottom lines, and comparable-store sales rose 4% globally, even with the loss of a day in the quarter compared to 2016, a leap year. 

Overall revenue fell 4% (3% on a constant-currency basis) to $5.68 billion, but that decline could be traced to it refranchising efforts, and the result still beat analysts' expectations for just $5.51 billion in revenue. Earnings per share, meanwhile, surged 18% (and 19% on a constant-currency basis) from $1.25 to $1.47, due to franchising and share repurchases; shares outstanding fell by 8% over the last year. That result compared to an average expectation of just $1.33 per share.

Also encouraging was the company's U.S. performance; domestic comp sales bounced back from their fourth-quarter decline to grow 1.7%. CEO Steve Easterbrook summed up the quarter, saying, "There's a sense of urgency across the business as we take actions to retain existing customers, regain lapsed customers, and convert casual customers into committed customers."

Now what

In March, the company announced the latest phase of its turnaround effort, promising new initiatives like using fresh beef in Quarter Pounders in the U.S., launching mobile ordering and delivery, and adding more in-store kiosks to make ordering easier and efficient.

Those moves appear to be paying off as the positive comp growth in the U.S. bucked an industrywide trend. Overall restaurant comparable sales were down about 3%. Easterbrook, who took the helm in 2015, seems unafraid to shake up McDonald's traditional playbook. He has consistently put customers' desires first, rolling out all-day breakfast; modernizing the menu to eliminate high-fructose corn syrup in buns, and human antibiotics in chicken; and now, harnessing technology to improve the customer experience. 

Though McDonald's long-term path may still be challenged, I'd expect profits to continue to improve as Easterbrook works to bring the brand into the future.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

McDonald's Corporation Stock Quote
McDonald's Corporation
$234.75 (-1.81%) $-4.34

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.