Bull/Bear Outlook: Are Investors Still Hungry for McDonald’s in 2018?

By Chris Lange Updated Jan 12, 4:51AM EST · Published Jan 4, 10:10AM EST

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Bull/Bear Outlook: Are Investors Still Hungry for McDonald’s in 2018? — © courtesy of McDonald's Corp.

With 2017 in the books and 2018 off to a roaring start, investors are taking this time to contemplate what to expect ahead. After all, this raging bull market is now nearing nine years old, and it has been the strongest bull market that most investors have ever seen. The Dow Jones Industrial Average (DJIA) rose 25% and the S&P 500 rose by almost 19.5% in 2017. Wall Street is by and large calling for tax reform, earnings growth and higher gross domestic product growth to continue the stock market gains in 2018.

24/7 Wall St. just came out with its annualized forecasting bias for the stock market in 2018. It looks like DJIA 26,400 and at least 2,855 on the S&P 500 are now the baseline targets for this year.

It’s also worth pointing out that on the heels of tax reform, Credit Suisse is now targeting 3,000 and Oppenheimer is targeting 2,900 for the S&P 500 in 2018. At the end of 2017, the forward valuation for the S&P 500 Index was 18.5 times to 19.0 times expected earnings per share according to two main sources.

Currently McDonald’s Corp. (NYSE: MCD) stock trades with a 24.43 forward price-to-earnings (P/E) multiple against 2018 expected earnings. This is expensive compared to the markets in general, but with the run that it saw in 2017 and the outlook for 2018, this multiple is warranted.

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McDonald’s is recognized the world over for its iconic golden arches, as well as its quick and affordable meals. While 2017 found McDonald’s near the top of the food chain in terms of its performance within the DJIA, up 45%, the restaurant chain will still be hungry in 2018.

Analysts are calling for McDonald’s to return 5.59% to investors in 2018, or a total of roughly 7.9%, including its dividend yield of 2.35%. This might not seem like much compared to 2017, but analysts are constantly re-evaluating their positions and the number is expected to push higher from here.

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McDonald’s is expected to report its most recent quarterly earnings at the end of the month. Thomson Reuters is calling for $1.58 in earnings per share (EPS) and $5.23 billion in revenue. The fourth quarter of last year notched $1.43 in EPS and revenue of $6.03 billion.

McDonald’s has a 52-week trading range of $118.18 to $175.78 and a market cap of $138 billion. Its weighting in the Dow is 4.80%, but the rank is roughly 38th of the S&P 500.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.