McDonald's Corporation (MCD): Why Fast Food Stocks Are Having Their Moment

TLDR

Table of Contents

McDonald’s stock up 2.15% while S&P 500 dropped nearly 5% amid tariff concerns
Fast food chains benefit from domestic sourcing, limiting exposure to new tariffs
McDonald’s expected to post $2.68 earnings per share for current quarter, down 0.7% year-over-year
Value promotions increasing at McDonald’s, with value mix now over one-third of offerings
Analysts maintain Neutral ratings on McDonald’s despite market outperformance

While tariffs sent most stocks plummeting, McDonald’s and other fast food giants saw their shares rise on Thursday, April 3, 2025. McDonald’s stock increased by 2.15% as investors looked for safe havens from the market turmoil caused by the implementation of reciprocal tariffs.

The Golden Arches wasn’t alone in bucking the downward trend. Yum! Brands rose 2.04% and Restaurant Brands International gained 1.39% while the S&P 500 dropped nearly 5% in a major sell-off.

McDonald's Corporation (MCD) — McDonald’s Corporation (MCD)

Analysts point to the fast food sector’s limited exposure to international supply chains as a key factor in their market outperformance. “Generally, the vast majority of the products are sourced domestically,” BTIG analyst Peter Saleh told Yahoo Finance.

The relative insulation from tariff impacts comes at a time when investors are actively seeking ways to “shield their portfolio from tariff risk and uncertainty,” according to Saleh.

Tariff Protection Through Domestic Sourcing

Starting April 5, all imports will face a baseline tariff of 10%, with rates increasing for about 60 countries on April 9. China will be hit particularly hard, facing a combined 54% tariff.

However, goods from Canada and Mexico that comply with the US-Canada-Mexico agreement (USMCA) are exempt from these duties. This represents a significant advantage for fast food chains, as roughly 80% of key food categories imported from those countries are USMCA compliant.

Fast food giants also benefit from their franchise business model. Unlike fast-casual restaurants such as Chipotle, Cava, and Shake Shack, which saw their shares drop 4%, 7%, and 12% respectively, franchised operations tend to be more resilient during economic downturns.

“If everybody’s sales are going to be hurt, the earnings are going to be hurt less for the franchise business models,” Saleh noted.

Value Promotions and Margin Pressures

Despite their stock market gains, McDonald’s and its competitors face challenges balancing value promotions with profitability. McDonald’s has increased its value mix to more than one-third of offerings, while Taco Bell has raised its value mix from 13% to 18%.

This focus on value could impact profit margins. Saleh believes McDonald’s value mix is “too much” and that they “need to bring it down to more reasonable levels and start promoting more full-price items.”

Phil Kafarakis, CEO of the Food Away From Home Association, predicts that the tariffs will likely cause “another round of reviews on pricing” across the industry.

He expects fast food restaurants like McDonald’s and Wendy’s to continue pushing promotional activity, such as $5 meal deals, to drive customer visits. “It’s going to be a margin squeeze… there’s no question about it,” Kafarakis said.

Financial Outlook and Analyst Perspectives

McDonald’s is expected to post earnings of $2.68 per share for the current quarter, representing a slight year-over-year decrease of 0.7%. For the full fiscal year, the consensus earnings estimate stands at $12.25, indicating a 4.5% increase.

Revenue projections show $6.13 billion for the current quarter, a marginal decline of 0.6% compared to the previous year. However, annual revenue is forecast to grow by 1.9% to $26.4 billion for the current fiscal year.

Despite the company’s recent stock performance, many analysts maintain a cautious stance. Both Bernstein analyst Danilo Gargiulo and BTIG’s Peter Saleh have Neutral ratings on McDonald’s.

Saleh noted concerns about valuation, stating, “You’re not getting a lot of earnings growth out of McDonald’s, and you’re paying 25 times earnings growth that… does not seem like a good value proposition.”

In its most recent quarterly report, McDonald’s reported revenues of $6.39 billion, representing a slight year-over-year decrease of 0.3%. The company posted earnings per share of $2.83, compared to $2.95 a year ago.

The Golden Arches has received a Zacks Rank #3 (Hold), suggesting it may perform in line with the broader market in the near term, despite its recent outperformance during the tariff-induced market turbulence.

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