Should I sell McDonald’s shares after Q4 results?

McDonald’s Corporation (NYSE: MCD) shares continue to trade above $250 support even though the company reported weaker than expected fourth-quarter results on Friday.

Oppenheimer has a positive view

McDonald’s reported weaker than expected fourth-quarter results last trading week; total revenue has increased by 13% Y/Y to $6 billion, slightly below expectations, while the Non- GAAP earnings per share were $2.23 (misses by $0.11).

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The positive fact is that global comparable sales increased 12.3% in the fourth quarter while the restaurant chain delivered a 7.5% comparable sales gain in the U.S. compared with the fourth quarter in 2020.

As a result of these actions, McDonald’s gained a share across most of its major markets, with strong 2-year double-digit growth in the U.K. and Canada and high single-digit growth in Australia.

The strong performance was driven by continued growth in the delivery business and by strategic menu price increases.

Marketing promotions together with growth in digital channels, driven by McDonald’s loyalty program, also contributed to the comparable sales growth.

Net income has increased by 19% to $1.64 billion during the fourth quarter, while the operating income has increased 12% and reached $2.4 billion.

The company’s business has proven resilient throughout the 2021 fiscal year; still, according to management, many of the challenges  McDonald’s experienced in 2021 will continue in 2022. Christopher Kempczinski, CEO of McDonald’s, added:

A surge in COVID-19 cases and a return of restrictions in many of our markets are creating uncertainty around the world, exacerbating labor shortages and supply chain delays. Additionally, rising consumer inflation levels are putting pressure on restaurant economics.

Research company Oppenheimer raised its price target to $290 on McDonald’s as it sees this company well-positioned for a multi-year period of sales outperformance.

According to Oppenheimer, McDonald’s has the ability to mitigate cost pressure vs. smaller peers amidst supply chain and labor disruption issues.

$250 represents the strong support

McDonald’s stock price has fallen more than 5% after reaching the highest level of 271, registered on January 04, 2022. The risk of further decline still persists, especially if the U.S. stock market enters a bigger correction phase.

McDonald’s shares are currently trading above $250, and if the price falls below this support, the next target could be $240.

On the other side, if the price jumps again above $270 resistance, it would signal trading shares, and the next target could be at $280 or even above.

Summary

McDonald’s reported weaker than expected fourth-quarter results, but the positive information is that McDonald’s gained share across most of its major markets. Oppenheimer raised its price target to $290 on McDonald’s, and according to Oppenheimer, McDonald’s has the ability to mitigate cost pressure vs. smaller peers amidst supply chain and labor disruption issues.

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