McDonald's Corporation (MCD) has witnessed healthy growth in the last reported quarter, surpassing the consensus estimates. It beat the revenue estimate of $5.70 billion by 3% and the EPS estimate of $2.58 by 3.9%. The company is bucking a trend seen by other chains that have also raised their prices, as it witnessed growing customer traffic in the United States.

The company’s worldwide presence and brand popularity have helped it navigate the troubling macroeconomic tides. "As the macroeconomic landscape continues to evolve and uncertainties persist, we are operating from a position of competitive strength," MCD's President and CEO, Chris Kempczinski, said.

In addition, MCD has paid dividends for 20 consecutive years. Its dividend payouts have increased at an 8% CAGR over the past five years and a 6% CAGR over the past three years. Its current dividend yield is 2.18%, while its four-year average yield is 2.27%, making it attractive for investors looking for passive income.

MCD shares have gained 19.4% over the past month to close the last trading session at $278.98. It has gained 3.9% year-to-date and 10% over the past year.

Here is what could shape MCD's performance in the near term:

Top-line Growth

MCD's revenues from franchised restaurants came in at $3.67 billion for the third quarter that ended September 30, 2022, up 4.6% year-over-year. Its U.S. sales came in at $713.60 million, up 8.9% year-over-year. Also, its revenues from International Developmental Licensed Markets & Corporate came in at $597.70 million, up 5.2% year-over-year.

Mixed Analysts' Expectations

Analysts expect MCD's revenue to decline marginally year-over-year to $22.95 billion in 2022. However, its revenue is expected to increase 2.6% year-over-year to $23.55 billion in 2023. Its EPS is expected to increase 7.2% year-over-year to $9.95 in 2022 and 5.2% year-over-year to $10.47 in 2023.

Also, its EPS is expected to grow 6.7% per annum for the next five years.

Robust Profitability

MCD's trailing-12-month gross profit margin of 56.13% is 55.6% higher than the industry average of 36.08%. Its trailing-12-month EBITDA margin of 45.44% is 311.3% higher than the industry average of 11.05%, while its trailing-12-month net income margin of 25.41% is 382.6% higher than the industry average of 5.27%.

In addition, MCD's trailing-12-month ROTC and ROTA of 12.89% and 12.01% are 93.8% and 149.2% higher than the industry averages of 6.65% and 4.82%.

POWR Ratings Reflect Promising Outlook

MCD has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

MCD has an A grade for Quality, consistent with its higher-than-industry profitability margins. Also, it has a B grade for Stability, in sync with its beta of 0.65.

In the 44-stock Restaurants industry, MCD is ranked #15. The industry is rated B.

Click here for the additional POWR Ratings for MCD (Growth, Value, Momentum, Sentiment).

View all the top stocks in the Restaurants industry here.

Bottom Line

MCD registered substantial year-over-year gains in its topline for the 2022 third quarter. While the stock has been gaining in price despite the market turbulence, Wall Street analysts see further upside potential in the stock. 

Moreover, of the 24 Wall Street analysts rating the stock, 20 have rated it a Buy. So, I think it might be an ideal investment for November.

How Does McDonald's Corporation (MCD) Stack up Against Its Peers?

While MCD has an overall POWR Rating of B, one might consider looking at its industry peers, Nathan's Famous, Inc. (NATH), Good Times Restaurants Inc. (GTIM), and Ark Restaurants Corp. (ARKR), which have an overall A (Strong Buy) rating.

MCD shares were trading at $278.56 per share on Wednesday afternoon, up $0.16 (+0.06%). Year-to-date, MCD has gained 5.65%, versus a -19.94% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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