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McDonald’s Stock Price Dip Is an Entry Point, Analysts Say

McDonald’s (NYSE: MCD) stock price lost more than 10% of the value from 52-weeks high of $220 that it had hit three months ago. Several factors contributed to the MCD share price selloff. The dismissal of CEO Steve Easterbrook is among the baggiest factor. In addition lower than expected growth in the latest quarter added to the volatility.

McDonald’s stock price is currently trading around the lowest level in the past four months of $190. Some market analysts are seeing the dip in MCD share price as an attractive entry point for long-term investors. MCD is among the dividend aristocrats and it has topped financial estimates 75% of the time since 2016.

MCD McDonald's Corporation daily Stock Chart

CEO Dismissal and Q3 Performance Impacted McDonald’s Stock Price

Following the dismissal of Steve Easterbrook, the new CEO Chris Kempczinski has now been on the job for a week. The new CEO is likely to enhance returns for investors along with investing in growth opportunities. Therefore, the trader’s concerns over the new CEO could disappear shortly.

It’s lower than expected same-store sales growth along with earnings miss has also negatively impacted investor’s sentiments. However, its results are better considering the industry growth trend. TDn2K reported that restaurant same-store sales grew 0.06% in October. This represents the second consecutive month of declining sales.

Global comparable sales in the third quarter grew 5.9% year over year. The comparable sales growth was driven by a 5.6% increase in the international operating segment and an 8.1% jump for the international developmental licensed segment.

Its consolidated revenue grew only 1% and missed analysts estimate by $40 million. The earnings per share of $2.11 fell short by $0.10 from the consensus estimate.

Cash Returns are Safe

McDonald’s is among the dividend aristocrats. It has raised the quarterly dividends in the past 43 successive years. The company currently offers a quarterly dividend of $1.25 per share, yielding around 2.58%. Its free cash flows are strong enough to cover dividend payments. It returned $2.4 billion through share repurchases and dividends in the latest quarter. This brings the total return to $22.5 billion in the three-year period ending 2019. Thus, the dip in McDonald’s stock price is presenting an entry point for new investors.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.