McDonald’s stock price moves lower on 17% fall in Q1 earnings

McDonald’s stock price moves lower on 17% fall in Q1 earnings
  • Earnings per share: $1.47 per share vs $ 1.57 per share expected
  • Revenue: $4.71 billion vs $4.65 billion expected
  • Around 25% of its restaurants globally remains closed
  • Shares of McDonald’s trade around 2.5% following the release of the Q1 earnings report

Shares of McDonald’s (NYSE:MCD) are trading around 2.5% lower today after the company reported a drop in profits by 17% in the first quarter amid the coronavirus outbreak that triggered restaurant closures. 

Fundamental analysis: Sales plunge

McDonald’s said that it took a plunge in its first-quarter earnings by 17% after the COVID-19 outbreak triggered restaurant closures. The company reported earnings of $1.47 per share, compared to $1.57 per share expected from Wall Street and $1.72 per share reported a year ago.

“Following our strong performance in 2019, McDonald’s began 2020 with exceptional global momentum, and our January and February sales were reflective of that trend. Since then, the global crisis caused by the COVID-19 pandemic has significantly disrupted our business, and we continue to operate in a very challenging and unpredictable environment,” said McDonald’s President and Chief Executive Officer Chris Kempczinski. 

The global fast-food chain also reported a revenue of $4.71 billion, higher than $4.65 billion expected from the market analyst. Net sales fell 6% on the back of the national lockdowns and restaurant closures. 

McDonald’s said that around 25% of its restaurant remains closed. As a result, the company’s quarterly earnings were “significantly affected” by the sales decline in March, the company said. 

“The outbreak of COVID-19 and the resulting operational impact brought on by several related factors, including restaurant closures, limited operations and dramatic changes in consumer behavior, led to a marked decline in sales during the second half of March and significantly affected the Company’s first quarter results.

Invezz reported earlier this month the company’s global same-store sales fell 22% in March due to the poor performance of its international business segments.  

Technical analysis: Buyers fail at important resistance

Shares of McDonald’s are trading around 2.5% lower after the company presented its Q1 results. The stock price is now trading below the important horizontal resistance around the $190 handle. Yesterday, shares of McDonald’s hit a 7-week high of $190.41.

McDonald’s stock daily chart (TradingView)

The price action came close to testing the 100-DMA at $193.12, but the bears forced a pullback ahead of the Q1 earnings report. Following a weaker-than-expected result, we may see a deeper pullback, with those looking to buy McDonald’s stock hoping for a move to $171, which represents an important horizontal resistance and a solid buying opportunity.

Summary

McDonald’s stock price took a hit today after the global fast-food chain reported weaker-than-expected first-quarter earnings. The company also communicated that around 25% of its restaurants remain closed worldwide. 

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.
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