Does McDonald’s Chart Look Tasty Ahead of Monday’s Earnings?Legendary American fast-food chain McDonald's NYSE:MCD will release its fourth-quarter results Monday (Feb. 10). What does technical and fundamental analysis say about whether MCD stockholders will deserve a break that day?
Let’s see:
McDonald’s Fundamental Analysis
As I write this, analysts expect the "Golden Arches" to post $2.86 in adjusted earnings per share for the quarter on roughly $6.5 billion of revenue.
Those numbers, if realized, would compare to $2.95 in adjusted EPS on $6.4 billion in revenue for the year-ago period. That would represent sales growth of only 1%, so analysts aren’t really expecting much.
In fact, 17 of the 31 sell-side analysts that I found that cover the stock have cut their earnings estimates since the current quarter began, while none have revised their forecasts higher.
Still, Wall Street might watch more closely this time around at McDonald’s comparable-store sales, which have sagged of late.
Total comparable sales fell 1.5% year over year during the third quarter, and that came after a 1% y/y decline in the second quarter.
Hmm ... two successive quarters of negative comp-sales growth after going years without seeing any kind of quarterly contraction.
The blame? International markets have turned on McDonald's. Performance outside of the United States has been far worse than domestic performance has been.
That hasn’t helped MCD’s stock price, which has surrendered about 9% of its value since peaking in mid-October just ahead of the third-quarter earnings release.
McDonald’s Technical Analysis
But what if Mickey D's posts positive fourth-quarter comp-sales growth next week?
I mean, I don't have a tip on this, but the stock’s chart as of Wednesday afternoon (Feb. 5) was showing a technical set-up for a positive surprise:
Readers will see that MCD is trying to break out of a so-called “falling wedge” pattern, which is historically a pattern of bullish reversal.
What we see above is that the shares have found help close to $280.40, marked by the middle gray horizontal line above. (MCD closed at $294.36 Thursday.)
That’s the 50% retracement level of McDonald’s late-June through mid-October rally, which was running along what was at the time the stock's 200-day Simple Moving Average (or “SMA,” marked with a red line above).
Meanwhile, McDonald’s 50-day SMA (the blue line above) has acted as resistance for the stock, with a $291 pivot point.
But look to the left of the recent action and what do we see? An unfilled gap that would require a tick at $313 or above in order to completely fill it in.
You know what they say about unfilled gaps, right? “They don't always fill -- but they usually do.”
Looking elsewhere on the above chart, there’s nothing to be discerned from the Relative Strength Index (above the chart), which is neutral.
However, look at the daily Moving Average Convergence Divergence indicator (MACD) at the bottom of the above chart. No, it's not postured bullishly -- at least not yet.
But the histogram of the 9-day Exponential Moving Average (or “EMA,” marked with blue bars) is above zero, while the 12-day EMA (the black line) is above the 26-day EMA (the gold line). Those two lines just have to get themselves above zero for this set-up to look truly bullish.
The Bottom Line
While nothing is certain, the chart above does suggest that McDonald’s could be ready to make a move -- potentially upward.
(Moomoo Technologies Inc. Markets Commentator Stephen “Sarge” Guilfoyle had no position in MCD at the time of writing this column.)
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