Goodmorning and happy Monday!

Today is set to be interesting as trading resumes following Friday's massive market rally, which saw all indices surge into the green on the back of encouraging PCE numbers from the Fed. 

(Source: Benzinga) 

Sure, June prices rose a bit, but the key here friends is that they only raised a smidge (+0.1%). . This signified to investors that our boy Jerome Powell is wrangling inflation as good, if not better than Glenn Powell wrangles woman tornadoes in Twisters. 

(Source: Giphy) 

So not only are we starting this week off with some solid bullish momentum, but the likelihood of rate cuts happening is the main driver that is amping up the market’s excitement. Plus, with earnings season in full swing as ninety-four companies report numbers today, volatility will be the name of the name this Monday. 

(Source: Giphy) 

However, with that said, hopefully, the majority of them will have much better numbers to give us than what Mcdonalds gave us before the market opened today. 

For those who haven’t seen it yet, McDonald's reported Q2 earnings this morning, and let me tell you, the numbers are about as appetizing as finding a hair in your Big Mac.

(Source: Yahoo Finance) 

The company reported revenue of $6.49 billion, up a mere 2.01% year-over-year, but still falling short of the $6.63 billion expected by Wall Street. Adjusted earnings came in at $2.97 per share, missing the $3.07 consensus estimate. Ouch.

Global same-store sales? Also down 1%, and the first quarterly decline since the COVID shutdowns in Q4 2020. 

(Source: Fast Company) 

In the US, same-store sales dropped by 0.7%, marking their first decline in 16 quarters. Internationally, it wasn’t much better, with a 1.1% drop in company-owned locations and a 1.3% decline in franchised spots. France, China, and the Middle East were particularly tough markets.

(Source: AP) 

Mcodonalds’s CEO Chris Kempczinski summed up the reasoning behind the dismal earnings perfectly as he stated: “Consumers are more discriminating with their spend.” Translation: People are tired of selling a kidney every time they want a Big Mac meal. For instance, the average cost of a Big Mac Meal has jumped 27% since 2019, now sitting at $9.29 in the US. Seriously, that’s more than a standard Netflix subscription. 

(Source: Giphy) 

The broader economic picture isn’t helping either. The US index for food consumed away from home is up 30% from mid-2019. With prices still on somewhat of an uptrend despite a positive PCE reading, people are rethinking their fast-food habits. Meaning even though Powell is happy where we are at with inflation, it’s clear consumers are still feeling a bit of a pinch every time they grab a burger.

(Source: Reddit) 

So in an effort to lure back customers, McDonald's recently extended its $5 meal deal (It’s about dang time!). This deal, launched at the end of June, includes a choice of a McDouble burger or McChicken sandwich, four-piece chicken McNuggets, small fries, and a small drink. And for what it’s worth, the move seemed to have worked, at least a little… 

(Source: Quickmeme) 

Foot traffic was up 2.8% the week of July 1 and 2.4% the week of July 8 compared to last year. But here’s the kicker: franchisees are saying that this deal is squeezing their margins. Some aren’t even bothering to advertise it because it’s just not profitable. 

(Source: Giphy) 

However, despite all the negativity, it’s not all soggy McNuggests and wilted lettuce for Micky D’s. Their loyalty program still seems to be a bright spot for the company. Digital sales brought in nearly $7 billion across 50 markets, more than the $6 billion reported in Q1. For the past 12 months, these members accounted for $26 billion in systemwide sales. Not bad at all Ronald… 

(Source: Restaurant Tech.) 

But even with that, when it comes to Mcdonald’s stock, investors aren’t exactly lining up to hold the bag. Upon the news of the earnings, According to Citi analyst Jon Tower, “Sentiment here is low, with many believing near-term initiatives around value offering not enough of a traffic lift to offset mixed headwinds.” Meaning, investors are about as excited for this stock as they are for a vegetarian option at Texas Roadhouse. 

(Source: Giphy) 

On the flip side, some long-term investors, bless their optimistic hearts, still see potential. Even though McDonalds (NYSE: MCD) is down -12.63% YTD (up +3.76 MTD), they believe that McDonald's value plays will eventually pay off, but it’s uncertain how long it’ll take for sales growth to reaccelerate. 

(Source: Google Finance) 

Now of course, only time will tell what ends up happening for McDonalds, but the earnings numbers paint a clear picture: consumer demand is slowing due to high prices. The bright side is that this is the main downfall the stock is experiencing right now. 

(Source: Giphy) 

We all know McDonald's has been a heavyweight in the fast-food game for decades, and we all know everyone loves obesity french fries and hamburgers. So really all McDonalds has to do is get creative on their prices without risking their margins… that's it. But as always, that’s way simpler said than done. 

In the meantime, while America’s clown prince of fast food tries to supersize their numbers for next quarter, take caution today and stay safe during today’s earnings volatility! Until next time friends… 

(Source: X) 

Stocks.News holds positions in McDonalds Corporation as mentioned in the article.