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MCD – Market expectations are for record-high Uniform ROA, but management may be concerned about market share, their international business, and franchisees

March 1, 2021

  • McDonald’s Corporation (MCD:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 28.2x Uniform P/E. At these levels, the market has bullish expectations for the firm. However, management may be concerned about their ability to expand market share, IOM segment margins and sales, and their partnership with franchisees

  • Specifically, management may lack confidence in their ability to expand market share, increase international operated market (IOM) segment margins and sales, and improve service times at their drive-thru operations. Furthermore, they may be concerned about the significant impact of COVID-19 and restrictions on their industry, the economic struggles of their consumers, and their digital and technology investments. Moreover, they may lack confidence in their ability to generate strong marketing momentum and drive growth through marketing investments. Furthermore, management may be exaggerating the quality of their relationship with franchisees, the financial liquidity available to franchisees, and their ability to help operators and partners survive the pandemic. Finally, management may lack confidence in their ability to continue investing in the strengths of their business, drive long-term profitable growth, and mitigate minimum wage increases through productivity savings