PreMarket Prep Hits The Drive-Thru: Comparing McDonald's, Wendy's Stock Performance

It is important to follow relationships and how the price action in one issue may or not affect others in its sector. On Thursday’s PreMarket Prep show, there was a discussion about how the recent price action in Wendy’s Co. WEN following its first-quarter report will impact its peer McDonald’s Corp (NYSE; MCD) in Thursday’s session. And what implications Wendy’s price action in 2022 may or may not have on McDonald’s moving forward.

Wendy’s Q1 Miss: After the close on Wednesday, Wendy's reported quarterly earnings of 17 cents per share, which missed the analyst consensus estimate of 18 cents by 5.56%.

This is a 15% decrease over earnings of 20 cents per share from the same period last year. The company reported quarterly sales of $488.6 million, which missed the analyst consensus estimate of $497.1 million by 1.71%. This is a 6.17% increase over sales of $460.2 million in the same period last year.

Wendy’s Price Action: When the earnings for Wendy’s were being discussed on the show, it was trading slightly in the red.

With the nasty price action from Wednesday, it was a question of whether Wednesday’s low would hold and instigate a rally. As it turns out, that low did hold, and the issue is now in the green by 90 cents at $16.97.

Comparing McDonald’s, Wendy’s In 2022: McDonald’s peaked in January at $271.15 and ended Wednesday's session at $244.43, which is a decline of $26.72 or just under 10%. Wendy’s peaked in January at $24.48 and ended Wednesday’s session at $16.07 for a decline of $8.41 or 34%.

While the January high was an all-time high for McDonald’s, Wendy’s all-time high was made in June 2021 at the height of meme mania at $29.42, making for a decline of $13.35 or 45%. 

Different Perspectives: The author of this article compared the 2022 performance of both issues. The assumption made was that McDonald’s may be due for more of a decline based on Wendy’s price action. Co-host Dennis Dick did not agree. 

He said: “McDonald's has pricing power galore. My kids will demand McDonald’s; they will not demand Wendy’s” He added: “I cannot believe the price of a Big Mac. They are passing the higher costs on to the consumer.”

McDonald's is being identified as a "safety trade" and holding up for now, Dick said, adding: "I would not want to own it long-term." 

MCD, WEN Price Action: At least in Thursday’s session, some investors were taking some chips off the table in McDonald’s and buying the dip in Wendy’s.

McDonald's closed slightly in the red at $244.19 and Wendy's rallied 7% to $17.20, according to Benzinga Pro. 

The discussion on these two issues from Thursday’s show can be found here: