MCD — McDonald's Corporation

As of 2026-09-13 the tape is unambiguously bearish: MCD is down 8.4% in one month, 11.33% in three months, and 22.65% in six, trading at $252.53 against a 52-week range of $252.15–$341.75 — effectively at the low. The cause is not earnings (TTM EPS of $12.364 is up roughly 5% YoY) but the growth narrative: Q2 2026 comps of +1.3% globally and +0.8% in the U.S., against an intensifying QSR value war and a lower-income consumer pulling back. Management's introduction of the '> NEXT' strategic plan and a change in the U.S. President role, rather than reassuring investors, read as confirmation that the legacy 'Accelerating the Arches' playbook has stalled. Analysts have followed the price down — TD Cowen kept a Hold but cut its target from $300 to $282 on 2026-09-11 — and the consensus target of $309.69 now sits ~23% above spot, which tells you how fast estimates have been re-anchored. Note the beta is only 0.414, so this is a company-specific de-rating, not broad market weakness.

Revenue keeps grinding higher but the composition has changed. Q2 2026 revenue of $7.100B was +3.8% YoY vs Q2 2025's $6.843B; Q1 2026's $6.517B was +9.4% YoY vs Q1 2025's $5.955B. Those headline gains come from unit growth and other revenue lines, not the core — systemwide comps were +1.3% globally and +0.8% in the U.S. The seasonal build from Q1 to Q2 was +8.9% in 2026 versus +14.9% in 2025, i.e. the ramp is flattening, which is the clearest evidence of deceleration in the dataset. Margins are the best part of the story and are holding: operating margin 46.5% in Q2 2026, 44.3% in Q1 2026, 45.0% in Q4 2025, 47.4% in Q3 2025 — roughly flat YoY (Q2 2026 slipped ~70bp from Q2 2025's 47.2%; Q3 2025 expanded ~100bp from 46.4%). EPS is steady mid-single-digit: $3.32 (+5.7% YoY), $2.78 (+6.9%), $3.03 (+8.2%), $3.18 (+1.6%). TTM free cash flow of $7.761B is up 12.5% from $6.897B a year earlier, and the accruals ratio of -0.75% of assets means reported net income is actually running behind operating cash flow — a genuinely healthy earnings-quality signal. Verdict: decelerating at the comp line, stable at the margin and cash-flow line. This reads as a cyclical/competitive traffic air pocket, not a structural break in the P&L.

As of 2026-09-13, MCD traded at 20.46x TTM EPS of $12.364 and 19.6x the next-FY consensus EPS of $12.916, versus a 5-year average P/E of 26.84x — a ~24% discount to its own history. P/S of 6.48 against a 5-year average of 8.32 is a similar ~22% discount, and the 2.85% dividend yield is the highest in roughly six years. Against that: PEG of 3.94 is expensive in absolute terms because growth is only mid-single-digit, and both P/B (-175x) and D/E are mathematically meaningless given -$1.02B of stockholders' equity. The honest label is 'cheap versus its own history and versus its quality' (45.8% TTM operating margin, 17.4% ROIC, best-in-class franchise economics) — but not statistically cheap on a growth-adjusted basis. This is quality at a cyclical discount, not a deep-value cigar butt, and the discount only closes if comps stop deteriorating.

This drawdown is almost entirely a multiple event, not an earnings event. From 2026-03-13 to 2026-09-13 the stock fell 22.65% while TTM EPS rose about 5% YoY — the P/E compressed from roughly 26x to 20.5x. Translation: the market is not repricing what MCD earned, it is repricing the durability of what it will earn, effectively pricing in U.S. comps turning negative. The asymmetry is wide and clean. If Q3 2026 shows U.S. comps recovering off the +0.8% trough, the multiple has room to re-rate toward 23x on $12.92 forward EPS — roughly $297 — with zero estimate increases required. If comps instead go negative and consensus forward EPS gets trimmed 5-8%, then 17-18x on $12.70-13.00 lands you at $215-235. So the entire trade is a single data point away: watch the comp line, not the P&L line, because margins and cash flow are already fine.

As of 2026-09-13, RSI(14) stood at 31.2 — near oversold but not below 30 — with the price at $252.53 against SMA20 -4.0% (~$263), SMA50 -5.85% (~$268) and SMA200 -14.37% (~$295). That is a textbook downtrend: price below every moving average, the 50-day deeply below the 200-day, and the stock sitting essentially on its 52-week low after -8.4% in a month and -22.65% in six. With a beta of 0.414, this is an idiosyncratic de-rating rather than a market-wide selloff. Implication: there is no technical base yet — no higher low, no reclaim of the 20-day. RSI near 30 makes a reflex bounce plausible at any moment, but a bounce is not a trend change. A disciplined entry signal would be either RSI below 30 with bullish divergence, or a close back above ~$263 and then ~$268. As of 2026-09-13 this is still falling-knife territory, and the -1.24% one-week return shows selling pressure had not exhausted.

• Lower-income consumer stress: compressed discretionary budgets have cut QSR visit frequency, which is the direct cause of +1.3% global and +0.8% U.S. comps despite heavy promotion — this is the single biggest swing factor for MCD's top line.
• QSR value war: sector-wide discounting supports traffic but squeezes restaurant-level margins; MCD's Q2 2026 operating margin already slipped ~70bp YoY to 46.5%, so the cost of holding share is visible in the numbers.
• Rate and refinancing environment: $39.86B of long-term debt against only $822M of cash as of 2026-06-30 means each refinancing is material to interest expense and therefore to EPS, even though the equity is negative and leverage ratios are unreadable.
• Defensive rotation: a 0.414 beta and 2.85% dividend yield make MCD a classic late-cycle haven — a real tailwind if macro deteriorates further, though it has clearly been insufficient to offset company-specific concerns through 2026.
• FX and international mix: a substantial share of systemwide sales and revenue is generated outside the U.S., so a stronger dollar is a translation headwind on reported revenue and EPS and can mask or amplify underlying comp trends.

• Q3 2026 earnings (expected late October/early November 2026) — the decisive test of whether U.S. comparable sales stabilize above +0.8% and whether the ~46% operating margin holds; a positive comp print is the fastest route to multiple re-rating.
• Execution of the '> NEXT' strategic plan and the new U.S. President's turnaround — early operational and traffic metrics will determine whether investors treat the pivot as credible or as a rebranding exercise.
• Further analyst revisions after TD Cowen cut its target from $300 to $282 on 2026-09-11 while staying at Hold — the consensus target of $309.69 has room to fall further, and the first upgrade cycle would be a strong sentiment inflection.
• Capital return optionality: at 20.5x earnings with a 2.85% yield at a six-year high, an accelerated buyback or a larger-than-normal dividend increase would be a cheap and credible signal of management's own confidence.
• Any stabilization in lower-income consumer spending broadly — MCD is a high-torque proxy for that cohort's health, and a turn there would lift the comp line without any company-specific action.

• The value war escalates from a traffic problem into a margin problem — Q2 2026's ~70bp YoY operating margin decline (47.2% to 46.5%) would need to become a sustained trend for the EPS story to actually break.
• Traffic decline proves structural rather than cyclical: if lower-income diners permanently trade down to groceries or cheaper QSR alternatives, +1.3% comps become 0% or negative, and 20.5x is not the floor.
• Balance sheet: -$1.02B stockholders' equity, $39.86B of long-term debt and $822M of cash as of 2026-06-30 leave limited flexibility; refinancing at higher rates hits EPS directly and D/E is unusable as a health check.
• Continued multiple compression without any earnings miss — the stock can keep sliding simply because the market decides 20x is still too high for a 1-2% comp business, which is a pure sentiment/valuation risk not captured by the fundamentals.
• Franchisee stress: persistent discounting combined with labor, coffee and occupancy inflation squeezes franchisee cash flow, eventually slowing remodels and unit growth and raising the risk of franchisee unrest.

Not a buy today, but this is the most interesting MCD has looked in years. Business quality is intact — 45.8% TTM operating margin, 17.4% ROIC, $7.76B of TTM free cash flow growing 12.5% YoY, a negative accruals ratio meaning cash earnings exceed reported net income, and a 2.85% dividend yield at a six-year high. What broke is the multiple (20.5x vs a 26.8x five-year average) and the growth narrative (1.3% global comps). At $252.53 on 2026-09-13 you are paying a below-history price for a best-in-class franchise — but you are doing it while the stock sits on its 52-week low with no technical base, at RSI 31.2, and while management is still in the first innings of a strategic reset under '> NEXT'. The honest read: risk/reward skews positive over 12-24 months, but nothing in the data yet shows the comp deceleration has bottomed. Wait for the Q3 2026 print or a technical base before treating this as an entry; the margin and cash-flow lines are already fine, so the comp line is the only thing that matters.

Blend of two methods as of 2026-09-13: (1) 22.5x next-FY consensus EPS of $12.916 = $290.6, where 22.5x is justified as a discount to MCD's 5-year average P/E of 26.84x (comps are now ~1% versus 8-10% at the 2023 peak) but a clear premium to the depressed 20.46x trailing multiple; and (2) 16.5x TTM EBITDA of roughly $14.7B (TTM operating income of $12.70B plus ~$2.0B of D&A), less $39.0B of net debt, on 710.5M shares = ~$286. Both legs converge in the high-$280s, giving $289 — about 14% above the 2026-09-13 price of $252.53 but below the sell-side consensus of $309.69, which I think under-weights the risk that Q2's +0.8% U.S. comp is not the bottom.