Monday's Earnings War: The Battle For The Soul Of McDonald's

| About: McDonald's Corporation (MCD)
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Positives and negatives are squaring off for McDonald's (NYSE:MCD). On Friday, the negative was ascendant, with the stock off badly. That will change when the server of high fat and slinger of Coke (NYSE:KO) to billions reports their second-quarter earnings on Monday-and the stock recovers.

Wall Street is expecting a profit of $1.38 a share on sales of $6.94 billion, but the calibration is not simple.

Bulls look at McDonald's and see the significant success of remodeled restaurants, which continue apace. Don't worry that McDonald's is getting too big and fancy for its britches: we're only talking neon being replaced by faux leather, but costumers have loved the results. Bulls also see growth in coffee -- McDonald's has turned itself into a poor man's Starbucks (NASDAQ:SBUX) -- as well as new menu items and McDonald's rededication to value, which it lost sight of briefly when it assumed an economic recovery that turned out to be stillborn.

Bears look at McDonald's and see that economy, which never got beyond nascent, and fears over corn, wheat and beef prices and the fractured state of the global economy, particularly in China and Europe. They see the Oak, Brook, IL, company as a victim of circumstance, not much different than Wendy's (NYSE:WEN), Burger King (BKW) or Yum Brands (NYSE:YUM).

Though it will not be by a great length, bulls will win out.

The fractured state of the economy favors McDonald's, which (unlike the competition) has a storied history of good performance in bad times, provided they aim at value, as they are now.

Commodity inflation, for its part, is a force that is both unpredictable and beyond the bounds of McDonald's operation. In this sense, management abilities seen in the form of the well-received renovations, which are pumping up sales in the mid-to-high single digit range as they are rolled out as part of a $1billion multi-year plan, will outweigh in performance and trader perception, wider, unpredictable forces like inflation, that tend to swing both ways anyway.

When McDonald's reports before bell on Monday, the bulls will win the battle for its soul.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.