McDonald’s, the iconic fast food restaurant, is set to announce their fourth quarter earnings on Monday, January 25th, right before the start of the business day. Thanks in part to a big overhaul of their menu, experts have boosted their earnings outlook for the company. Many believe that this could be the company’s best quarter in more than four years. McDonald’s is currently close to its one year high, being less than $2 off of the high point of $120 and change. Much of these gains have occurred in the last two months, and it seems that even more are in the future.
The flip side of this, as cautious investors will tell you, is that McDonald’s is a part of the Dow Jones Industrial Average. The Dow has seen the worst start to a year in 2016 that it has ever seen, and some sort of traction is needed if recovery is going to happen. Last week, GE announced better than expected earnings, and although GE saw its price drop after their announcement, the rest of the market closed out well on Friday. As McDonald’s is the next major player to announce results, it’s likely that even more positive can come of this. For short term index traders, specifically binary options traders that take out 24 hour to 5 day long positions, getting poised to go long on the Dow—and on McDonald’s stock, if your binary broker offers it—is the best course of action.
The drops have been so severe this year that positive corrections are warranted here as well. The good news that is expected out of MCD should be more than enough to bolster this index. Finding ways to profit from this are smart. You don’t need to use binaries, but they do offer you an ease of entry into index trading that will not force you to use high cost mutual funds or unpredictable ETFs. What you use, of course, is up to you, this is just one of many approaches.
The reverse situation would be if MCD doesn’t hit expectations after they were boosted. The consensus opinion right now is that earnings will stand at $1.23 per share. The original forecast was just $1.21, and for a company with over 900 million shares in existence, that’s more than an $18 million difference. In other words, if this estimate is right, McDonald’s has become way more profitable than anyone expected. The higher they are above this number, the more encouraging the news will be for the overall economy. McDonald’s isn’t just a large U.S. based company, after all. They are one of the biggest and most recognizable fast food chains in the entire world, so this is a litmus test for expendable income all over the world. There is a lot of potential that could come from this earnings report.
But, if earnings are now average, or even just a penny below the new estimate, there could be negative repercussions, all with the same magnitude. The worldwide economy really is in a precarious place right now, so MCD has a lot riding on it. They are not the biggest company in the DJIA by any means, but they are one of the most well known. And because this is still the start of earnings seasons, it would be nice to see GE and MCD set the year off right. The Dow really needs a boost, and this could be exactly what it needs to break free from the anchor pulling it down that is currently taking the form of crude oil and the Chinese stock market.