Is McDonald's Stock Underperforming the S&P 500?

With a market cap of $187.5 billion, McDonald's Corporation (MCD) is the world’s leading global foodservice retailer, with around 44,000 locations across more than 100 countries. About 95% of its restaurants are owned and operated by independent local business owners, giving McDonald’s a highly franchised global business model. 

Companies valued at more than $10 billion or more are generally considered “large-cap” stocks, and McDonald's fits this criterion perfectly. The company serves around 68 million people daily while focusing on food quality, community connection, its people, and environmental impact.

Shares of the fast food giant have pulled back 22.7% from its 52-week high of $341.75. Shares of McDonald's have fallen nearly 5% over the past three months, lagging behind the S&P 500 Index’s ($SPX) nearly 2% rise over the same time frame.

The stock is down 13.2% on a YTD basis, underperforming SPX’s 12.7% increase. Moreover, shares of McDonald's have declined 15% over the past 52 weeks, compared to SPX’s 18.6% return over the same time frame.

Despite a few fluctuations, the stock has been trading below its 50-day and 200-day moving averages since last year.

McDonald’s has underperformed as affordability pressures weigh on its lower-income customer base, while weak execution of value promotions has failed to drive enough traffic. Slowing comparable-sales growth, softer U.S. demand, and investor concerns about whether its value strategy can restore traffic have also kept sentiment subdued.

In comparison, rival Yum! Brands, Inc. (YUM) has outperformed MCD stock. Shares of Yum! Brands have gained 5.8% over the past 52 weeks and 1.7% on a YTD basis.

Despite McDonald's weak performance, analysts are moderately optimistic about its prospects. The stock has a consensus rating of “Moderate Buy” from the 35 analysts covering it, and the mean price target of $317.94 is a premium of 20.4% to current levels.