McDonald's Faces Challenges Amidst Stagnating Sales Performance

McDonald's struggles with flat revenue and declining net income. The outlook remains uncertain as the company tries to stimulate sales with discounts. Investors should be cautious moving forward in light of these challenges.

Date: 22-02-2025

AI Rating: 4

Revenue Growth: McDonald's revenue growth has stagnated, with full-year 2024 results showing flat revenue of $6.39 billion compared to $6.4 billion in 2023. This performance fell short of analysts' expectations of $6.44 billion, indicating a lack of momentum in attracting consumers.

Net Income: The company's net income also declined by 1% to just under $2.02 billion, or $11.39 per share for 2024, compared to $11.56 per diluted share in 2023. This decrease signals potential profitability challenges for the fast-food giant.

Comparable Sales: The decline in comparable sales in previous quarters (1.5% in Q3 and 1% in Q2) shows a worrying trend. The company shows an ongoing struggle to attract consumers, revealing weakness against competitors that are growing revenue at double-digit rates.

McDonald's efforts to introduce value-centric meals, like the $5 combo, aim to draw price-sensitive consumers. However, the overall average check of more than $10 raises questions about the effectiveness of this strategy. This could mean the company struggles to cover losses in ticket size.

The outlook for the first quarter of 2025 appears weak, as indicated by the CFO, further complicating the picture for investors. Analysts at J.P. Morgan have set a price target of $300, which suggests minimal upside potential from current levels, further demonstrating the company's challenges in beating the market.

Overall, while McDonald's remains a strong brand, the current financial metrics indicate that it is not performing well enough to offer a strong investment case compared to its competitors. Investors should exercise caution given these stagnating results and ongoing challenges.

Stocks: MCD