Mickey D's: Not So Mighty After All

McDonald's (NYS: MCD) has been on a tear for years, but could it be losing the mighty momentum it kept up for so long? The fast-food giant's April same-store sales were weaker than analysts expected, and everybody's become accustomed to expecting nothing short of sizzle from its same-store sales figures.

Last month, Mickey D's global same-store sales rose 3.3%, a figure that fell short of analysts' forecast for a 4.1% increase and the company's own guidance for a 4% increase.

One might have expected weakness in Europe (Starbucks (NAS: SBUX) shocked no one last month when it revealed weakness there in its quarterly results), but McDonald's weakness actually emanated from its Asia/Pacific, Middle East and Africa segment, which reported a skimpy 1.1% comps increase.

Here in the U.S., McDonald's same-store sales rose 3.3%. European comps rose 3.5% in Europe on strength in France, Germany, the U.K., and Russia.

In the grand scheme of things, though, McDonald's still dishes out stronger results than many peers. Burger rival Wendy's (NYS: WEN) served up a disappointing quarter today, reporting a 2% revenue increase that didn't meet analysts' expectations. Quarterly comps were anemic, too, rising a scant 0.8% at company-owned stores and 0.7% at franchised ones.

McDonald's stock price has been easing recently because of days like this as well as macroeconomic stress. Its forward price-to-earnings ratio of 15 is cheaper than Wendy's, which trades at 20 times forward earnings, and another fast-food giant, Yum! Brands (NYS: YUM) , which is trading at 19 times forward earnings at the moment. Furthermore, Mickey D's multiple certainly tantalizes value-oriented investors more than its former subsidiary Chipotle's (NYS: CMG) forward P/E ratio of 36.

Still, let's not forget a major risk that hangs over the Golden Arches: CEO Jim Skinner plans to retire this summer. His replacement, Don Thompson, has a tough act to follow, and the troubling global macroeconomic climate is an ongoing risk for many companies.

Investors who been waiting for an opportunity to buy McDonald's shares at better prices are getting the opportunity as the stock price recedes, but given some of the swirling uncertainties, still cheaper prices may present themselves in the near term. In other words, it's probably a good idea to wait a bit before taking a heaping helping of McDonald's shares; more bang for the buck could be coming soon.

Our analysts identify McDonald's as one of 3 American Companies Set to Dominate the World. Follow the link to find out the other two; the report is absolutely free.

At the time this article was published Alyce Lomaxowns shares of Starbucks. The Motley Fool owns shares of Starbucks and Chipotle Mexican Grill.Motley Fool newsletter serviceshave recommended buying shares of Chipotle Mexican Grill, McDonald's, Starbucks, and Yum! Brands, writing covered calls on Starbucks, and creating a bear put spread position in Chipotle Mexican Grill. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story