McDonald's Banks on Strategic Initiatives Amid High Costs

McDonald's Corporation MCD continues to demonstrate strong execution as it advances the Accelerating the Arches strategy. Great marketing strategy, great tasting menu and value-added meals remain key drivers of the company’s long-term, sustainable growth.

However, a tough consumer environment, persistent inflationary cost pressures and increasing competition in the fast food dining space continue to pose challenges.
  
Shares of this fast food chain have gained 0.2% in the past six months, outperforming the Zacks Retail - Restaurants industry’s 6.1% decline. Its earnings topped the Zacks Consensus Estimate in two of the trailing four quarters, met on one occasion and missed on the remaining, the average negative surprise being 0.4%.

 
The earnings estimate for 2025 has been revised downward to $12.11 per share from $12.32 over the past 30 days. While ongoing economic pressures and intensifying competition continue to weigh on the stock’s performance, McDonald’s operating efficiencies and strategic initiatives may help support absolute earnings growth going forward.

McDonald's currently has a Zacks Rank #3 (Hold). Let’s take a closer look at the key factors supporting the stock’s performance and the challenges that may hold it back.

Factors Aiding MCD Stock

Strong Brand Image: McDonald’s remains one of the world’s most recognizable fast-food brands and continues to reinforce its position as the most valuable global restaurant brand through effective marketing and steady operational improvements across the leading markets. This strength is reflected in its performance, with solid third-quarter results despite a challenging consumer environment and a tough QSR backdrop. Global comparable sales rose 3.6%, while U.S. comparable sales increased 2.4%. 

The company also delivered another quarter of positive comp sales and maintained guest count advantages over its nearest competitors. In addition, for the second consecutive quarter, McDonald’s delivered global system-wide sales growth of more than 6% in constant currency, highlighting the growing contribution from new unit openings.

Digital Transformation Through Customer Engagement: Digital engagement continues to be a major growth driver for McDonald’s, strengthening customer connections and increasing visit frequency. In 2025, the company is prioritizing app-based engagement, building on successful initiatives seen in international markets. 

The return of MONOPOLY — now fully digital and available exclusively through the MyMacca’s app — has become one of McDonald’s largest digital customer acquisition events, driving significant increases in app downloads and registrations. With roughly 45 million 90-day active users in the United States, the campaign is helping more customers discover the brand’s strong value offerings and contributing meaningfully to digital sales growth. 

Focus on Menu Innovation: McDonald’s is advancing the long-term growth strategy by continuously introducing new menu items while reinforcing its value proposition. MCD also brought back Snack Wraps in early July at a popular $2.99 price point, generating strong excitement among fans. In September, the company launched Extra Value Meals, featuring a nationally advertised $5 Sausage McMuffin with Egg meal and an $8 Big Mac meal. November followed with a $5 Sausage, Egg, and Cheese McGriddles meal and an $8 10-piece Chicken McNuggets meal. 

At the same time, the beverage category test across 500 U.S. restaurants is generating strong early customer satisfaction and operational feasibility, with offerings including cold coffee, crafted sodas and refreshers designed to drive incremental daypart occasions and higher average check. In its Internationally Operated Markets, innovation highlights such as the Chicken Big Mac in the U.K. and McWings in Australia exceeded expectations. The company plans to continue expanding its chicken portfolio and rotating limited-time offers to meet evolving consumer preferences.

Factors Hindering Growth

Margin Pressures: Commodity inflation, particularly in food and beverages, negatively impacted the company’s performance. In the third quarter of 2025, the company reported adjusted earnings per share (EPS) of $3.22. However, on a constant-currency basis, earnings declined 1% year over year, largely due to a significantly higher effective tax rate of 22.8%, which offset gains in adjusted operating income. Margin pressure was also evident in U.S. company-operated restaurants, where the 2.4% increase in comparable sales was not enough to fully absorb rising operating costs, including higher wage levels and increased food and paper expenses.

High Competition: McDonald’s operates in an increasingly competitive fast-food landscape, with both long-established brands and rapidly growing new entrants intensifying the pressure. This heightened competition may adversely impact McDonald’s restaurant operating margins and profitability.  

Better-Ranked Stocks

Some better-ranked stocks from the Zacks Retail-Wholesale sector are:

El Pollo Loco Holdings, Inc. LOCO presently sports a Zacks Rank #1 (Strong Buy). The company delivered a trailing four-quarter earnings surprise of 19.6%, on average. LOCO stock has decreased 5.1% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for LOCO’s 2026 sales and EPS indicates growth of 1.3% and 4.2%, respectively, from the year-ago period’s levels.

Expedia Group, Inc. EXPE flaunts a Zacks Rank of 1 at present. The company delivered a trailing four-quarter earnings surprise of 4.5%, on average. EXPE stock has gained 38.2% year to date.

The Zacks Consensus Estimate for EXPE’s 2026 sales and EPS indicates growth of 6.3% and 20.9%, respectively, from the prior-year levels.

Red Robin Gourmet Burgers, Inc. RRGB carries a Zacks Rank of 2 (Buy) at present. The company delivered a trailing four-quarter earnings surprise of 68.4%, on average. RRGB stock has declined 19.9% year to date.

The Zacks Consensus Estimate for Red Robin’s 2026 EPS implies an increase of 31.7% from a year ago.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research