McDonald's (MCD) Stock Rises Over 3% After Impressive Q3 Earnings

On Friday, fast food giant McDonald’s (NYSE:MCD) saw its stock price jump over 3% to $114.29 per share after its third quarter earnings report was released to the public. This news was a pleasant surprise to investors. MCD beat expectations, reporting $1.62 per share and revenue of $6.42B. This exceeds analyst’s estimates of $6.27B and $1.48 per share.

These earnings can be contributed to the new business strategy being enforced by CEO Steve Easterbrook. Since being promoted to CEO in March of 2015, Easterbrook has made it his mission to change the dynamic and marketing strategy of the company.

Specifically, major changes and additions to the menu have helped contribute to the company’s earnings growth. The All-Day Breakfast menu addition that went into effect one year ago is one example of how Easterbrook is attempting to market to a wider audience.

In addition, the surprising earnings this quarter can be correlated to the recent Two-for-$5 menu, and improvements to make healthier Chicken McNuggets without preservatives. This is following the trend of making healthier menu options for a growing health conscious society.

Easterbrook released a statement following the earnings report, saying “Our third quarter results, including our fifth consecutive quarter of positive comparable sales across all segments as well as improved restaurant probability, are a testament to the progress we are making to satisfy the needs of today’s dynamic customer.” Acknowledging the ever-changing food market in an effort to increase sales and bring in more customers is exactly why Easterbrook was promoted to CEO.

While this is a step in the right direction, there are still concerns about whether McDonald’s can keep up this growth. Zacks Rank currently rates MCD a #4 (Sell), with a VGM score of ‘D’.

It is a positive sign that MCD has exceeded expectations in recent quarters, but intense competition from Panera Bread (NASDAQ:PNRA) and Chipotle Mexican Grill (NYSE:CMG) has caused some concern for investors. While MCD has made an effort to boost its healthy menu options, it is becoming harder to compete with fellow companies who offer a wider selection of health conscious items.

McDonalds is currently in the bottom 34% in its industry rank (RETAIL-RESTRNTS). While the company is moving in the right direction, it is clear that many risks and factors are still present for the popular burger chain.

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