On Aug. 4, McDonald’s (MCD +1.10%) reported that U.S. same-store sales growth slowed to just 0.8% as “business slowed significantly” in the second quarter. CEO Chris Kempczinski pinned the shortfall on the company’s own execution, and U.S. chief Joe Erlinger was replaced the same day in what the company called a “planned transition.”
For a brand built on consistency, the results since last year have been anything but. That’s when traffic patterns within the restaurant industry began to change as diners became more value-conscious.
At roughly 20.5 times forward earnings, the stock trades below its five-year average, pricing in modest earnings growth from here. So, is this an opportunity now for investors?
Image source: The Motley Fool.
The value prop didn’t register
McDonald’s spent years raising prices to offset inflation. By last fall, Kempczinski acknowledged that lower-income diners had been pulling back for a couple of years. The company responded by relaunching Extra Value Meals, which drove a recovery, with U.S. same-store sales growing 3.9% in the first quarter of 2026. In April, management expanded the value platform with a new under-$3 menu and a $4 breakfast meal deal.
But the rollout gave operators too much leeway, leading a third of franchisees to price items higher than originally intended. To fund the new menu, management also pulled back on digital offers and removed the Buy One, Add One for $1 deal that loyal customers relied on. Kempczinski called the combination “a bad trade.”
Traffic fell in the second quarter, even as comps rose 0.8% on higher average checks. Management said U.S. comps were “slightly negative” in July, and the timeline for a fix could run beyond the third quarter. The company also pushed its 50,000-restaurant target back a year, to 2028, citing the consumer backdrop and higher development costs.
The landlord has staying power
McDonald’s is a burger chain that doubles as one of the world’s largest landlords. The company collects more than $10 billion in annual rent from its franchisees. It owns the buildings of roughly 80% of its 45,000-plus restaurants and the land under about 56% of them.
This real estate portfolio, in which rent tops royalties by billions of dollars a year, provides the stability that has funded 49 consecutive years of dividend increases. But the same model that delivers the rent can slow things down when the value message needs to move in lock-step.
The same week, Restaurant Brands International reported that U.S. same-store sales at Burger King jumped 8.5%, its second straight quarter of accelerating growth. In Q2, Burger King beat the U.S. burger industry by more than nine points. Four years into a rebuild of its restaurants and operations, Burger King is winning back traffic with a better Whopper.
Today’s Change
(1.10%) $2.92
Current Price
$268.45
Key Data Points
Market Cap
Day’s Range
$267.01 – $268.95
52wk Range
$260.96 – $341.75
Volume
815.3K
Avg Vol
4.6M
Gross Margin
57.38%
Dividend Yield
2.77%
For McDonald’s, it’ll take time to get the value message aligned, but the company’s rent stream amply covers the 2.7% dividend yield. Investors should watch for guest counts in the U.S. to turn positive and for details on its strategy at the company’s Investor Day on Sept. 23.
At roughly 20.5 times forward earnings, the stock trades below its five-year average, offering a reasonable price for patient investors.
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