McDonald's $5 Value Meal Fails To Offset Lower Traffic: 4 Analysts Cut Forecasts After Q2 Results

Shares of McDonald’s Corp MCD remained highly volatile in early trading on Tuesday, after the company reported downbeat second-quarter earnings.

The results came amid an exciting earnings season. Here are some key analyst takeaways.

BofA Securities On McDonald’s

Analyst Sara Senatore reiterated a Neutral rating, while reducing the price target from $288 to $278.

McDonald’s $5 Value Meal is "meeting internal expectations and gaining traffic share among lower income consumers," Senatore said in a note. She added, however, that this is being more than offset by "continued negative trends in the U.S."

The company's same-store sales growth in July was "negative across all operating segments," the analyst wrote. Beef prices turning more favorable in the back half of 2024 and expense management could keep margins intact, she further stated.

Goldman Sachs On McDonald’s

Analyst Christine Cho maintained a Neutral rating, while cutting the price target from $288 to $284.

Although McDonald’s reported its sales and earnings short of expectations, the stock climbed due to the company's aggressive pivot to value meals “in response to weaker consumer demand across all markets,” Cho said.

"Although not providing metrics around 3QTD comp trends, MCD noted plans for expanded value offerings across domestic (extending the $5 value menu to the end of August) and international markets (i.e., further rollouts of the McSmart value menu across IOM countries)," the analyst wrote. "Overall, we remain on the sidelines on MCD as we see the fast food value war and depressed consumer demand weighing on the top line," she further stated.

Check out other analyst stock ratings.

BMO Capital Markets On McDonald’s

Analyst Andrew Strelzik reaffirmed an Outperform rating, while lowering the price target from $330 to $315.

McDonald’s reported earnings of $2.97 per share, short of consensus by 10 cents per share, "reflecting comp shortfall across segments," Strelzik said. "Pressures continued into July, though $5 meal deal is driving participation and additional value programs are on horizon," he added.

The company seems to be "among best positioned for value-oriented consumer backdrop," the analyst wrote. "With potential for sales inflection, easing comparisons, and relative earnings visibility, valuation creates attractive opportunity to capitalize given MCD's competitive advantages and steady long-term growth potential," he further stated.

KeyBanc Capital Markets On McDonald’s

Analyst Eric Gonzalez reiterated an Overweight rating, while reducing the price target from $310 to $305.

McDonald’s same-store sales growth turned negative in the second quarter and "global SSS growth has not improved from the exit rate it saw in June," Gonzalez wrote in a note.

"While the U.S. SSS decline was likely in line to slightly better than feared, the Company suggested trends remained in negative territory in July across each of its three major business units," the analyst said. He added, however, that McDonald’s is taking steps to "address its value proposition" and the brand's size, scale, and competitive advantages could drive market share gains over time.

MCD Price Action: Shares of McDonald’s were up 0.94% to $263.89 at the time of publication on Tuesday.

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