McDonald's Earnings Preview: Weakening Consensus from the Crowd

McDonald's Corp. (MCD) reports its earnings for Q1 2009 before markets open on April 22. Piqqem Sentiment for shares of MCD has dropped from a six-month high of 2.82 (on a 0-to-4 scale with 0 as lowest) to 2.64, a significant drop of 18 basis points. In comparison, according to First Call analyst sentiment for the fast food chain has dropped roughly 6 basis points, from a rating of 2.06 (on a 1-5 point scale with 1 as highest) to 2.0 over the course of the last 120 days. Analysts appear to be more bullish than the general crowd at Piqqem. However, sell side analyst sentiment has been shifting to meet the general crowd sentiment.

There are clearly some challenges facing McDonald's. Key competitor Burger King (BKC) reported weak March sales. Starbucks (SBUX) is mounting a sustained effort to stem any market share losses in the premium coffee markets to counter McDonalds' successful McCafe push. Additionally, further increases in the value of the U.S. dollar relative to other currencies could hurt McDonald's due to its relatively greater reliance on growth from outside the U.S. McDonald's executives have restated optimism for 2009, saying that sales in January and February have been solid and international markets such as Brazil and China are performing strongly. The company has an exceptionally strong track record. However, if McDonald's misses whisper estimates shareholders may punish the company due to higher expectations expressed in the recent upward momentum in the stock, as it rose from the $51 range to the $56 range.

Disclosure: No positions in any stocks mentioned here.