Buyers “Lovin It” – McDonald’s On Solid Ground With Menu Revamp

The world’s largest burger chain has witnessed its stock edge down by 0.46% to $127.14, as investors get cautious before McDonald’s Corp second-quarter earnings report.

The firm is due to announce its second-quarter earnings report before the market opens on Tuesday (26/7). Economists are expecting McDonald’s to report Q2 revenue of $6.3 billion, which is lower than the reading of $6.5 billion in the same quarter a year earlier. Additionally, the firm is anticipated to post a 3.6% rise in global same-store sales for the quarter ending on June 30, while the main U.S market saw a great 3.2% advance. Net income per share is forecast to come in at $1.39 a share, compared with $1.26 a share a year earlier.

In the previous quarter, the company had reported a 0.9% rise in US same-store sales, the very first rise after seven straight quarters of declines. One of the factors that have contributed to lifting the revenue for McDonald’s is a healthier menu. The company has made a minor switch from margarine sandwiches to butter ones, which has boosted sales of Egg McMuffins by double digits. Healthy food options such as salads and whole-wheat wraps are also appealing for a section of consumers, which is estimated to drive the company’s sales higher.

Moreover, the burger chain is attempting to raise its revenue via technological innovation. Last week, McDonald’s Japan announced plans to collaborate with the maker of the Pokémon Go phenomenon so that the restaurant outlets would become an ideal destination for game-players. The partnership will help expand the corporation’s market size and raise customer traffic, especially youngsters, to McDonald’s restaurants.

Nevertheless, there are some factors which could hinder second quarter sales growth, including the rising civil unrest and violence globally, as well as the turbulence in financial markets. The increasing number of crimes could trigger customers switching to delivery services, instead of going to restaurants. Furthermore,  the effects of Brexit could cause currency devaluations and volatility in some major markets such as Europe, which could hit global sales.


Fig. McDonald’s D1 Technical Chart

On the daily chart, the stock is moving in a strong uptrend since June 28, despite the recent pull back. ADX (14) edged up to the level of 54, along with the DI+ line still moving above the DI- line, consolidating the bullish trend. Moreover, the price action is still receiving support from the moving average below, which helps consolidate the up move. The trend indicator still encourages a long position with the green arrow placed under the price movement since July 15. The level 0.0% of Fibonacci retracement is anticipated to be tested.

Trade suggestion

Buy stop at 127.40, Take profit at 128.43, Stop loss at 127.04.

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