This article looks at the 11 best fast food stocks to invest in right now. We also discuss the changing consumer preferences related to fast food consumption amid rampant inflation in the United States.
Fast food is integral to American culture and remains popular among adults and children. According to a report by the CDC, one-third of Americans consume fast food every day, while 83% of the country’s families dine out at a fast food restaurant at least once a week. Around 45% of the population aged between 20-39 consume fast food every day, while the indulgence rate of those between 40-59 years of age is slightly lower at 37.7%. On the other hand, 34% of children regularly eat fast food daily.
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However, an increasing number of Americans are beginning to pull down on their consumption and eating less fast food per week due to high prices. A survey by Lending Tree in May 2024 highlighted that about 78% of the citizens consider fast food a ‘luxury’ after rampant inflation in the country has forced Americans to reassess their spending habits. Surge pricing in restaurants has also added to their worries, with about 72% confessing that they would prefer having fast food during discount hours.
Over the past year, menu prices have risen considerably in the US across the wider restaurant industry, driven by increased commodity and supply chain costs. This has boosted consumer desire in the country to eat at home. Carnegie Investment Counsel’s portfolio manager, Razmig Pounardjian, stated the following to Reuters in May:
“The lack of value offers has opened up consumers to shop for different options whether it be other (chains) or the grocery stores.”
Despite challenges, the American restaurant industry remains resilient, primarily because it adapts well to changing consumer habits. The National Restaurant Association has forecast sales to top the $1 trillion mark in 2024 for the first time. It also expects the industry to create 200,000 new jobs, citing what is generally a strong demand from Americans to eat at restaurants.
A restaurant ETF issued by AdvisorShares, which invests exclusively in the restaurant and food industry has gained 18.32% YTD, outperforming the broader market by over six percentage points, as of the close of October 31. The Fed rate cuts will likely help restaurant stocks as they would to the broader market. The low cost of borrowing will boost consumer spending and ease the burden on restaurant owners, allowing them to go ahead with their expansion plans.
In September this year, the Federal Reserve announced a 50-basis point rate cut – the first since March 2020 – to lower the range of interest rates from 4.75% to 5%. Details emerging from the minutes of the September meeting disclosed a ‘substantial majority’ of central bankers backing the cut, which has raised optimism among investors for further cuts ahead in the November meeting.
Another encouraging recent trend has been the downturn in the country’s inflation, which dropped to 2.4% in September and is inching toward the Federal Reserve’s goal of a two percent annual rate. With that said, let’s now head over to our list of the best fast food stocks to invest in right now.
A close-up of a hamburger, french fries, and a soft drink, representing the fast food chain.
Methodology
We used Finviz’s restaurant industry screener to sample stocks for this article and then identified the companies that dealt with fast food. Among them, we picked the top 11 companies with the highest number of hedge funds having stakes in them. We ranked them in ascending order of hedge fund holders in each company. Data on hedge funds was sourced from Insider Monkey’s database of 912 hedge funds for the second quarter of 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
11 Best Fast Food Stocks To Invest In Right Now:
11. Jack in the Box Inc. (NASDAQ:JACK)
Number of Hedge Fund Holders: 16
Jack in the Box Inc. is an American restaurant company that specializes in quick-service food. It was founded in 1951 in San Diego, California, where it is headquartered. The hamburger giant operates around 2,200 restaurants across 22 states of the US. The company also owns Del Taco, a Mexican fast-food chain, that has more than 600 restaurants nationwide.
The company’s share price has dropped by 38% YTD due to a series of challenges the broader restaurant industry continues to face, such as rising labor costs, commodity prices, and changes in consumer preferences amid high inflation. These have had an impact on Jack in the Box Inc. (NASDAQ:JACK)’s financial performance.
On August 6, the company reported its results for Q3 2024. During the quarter, same-store sales for the company declined by 2.2%, with company-owned same-store sales up 0.1% and franchise restaurant comps decreasing by 2.4%. Restaurant-level margin totaled $21.1 million, reducing by 80 basis points to 21%, driven by higher labor and other operating costs. The franchise-level margin was $74.6 million, or 41.1%, down from $75.3 million a year ago. This was attributed to an overall drop in sales and the resulting decrease in royalty.
Del Taco’s performance also suffered during Q3, with same-store sales decreasing by 3.9%, comprising a 4.1% drop in franchise same-store sales and company-operated same-store sales going down 3.5%. Restaurant-level margin was $8.8 million, or 13.4%, down 400 basis points year-over-year. During the quarter, Jack in the Box Inc. (NASDAQ:JACK) also recorded a non-cash goodwill impairment of $162.6 million for Del Taco, because of which the company had a consolidated diluted loss per share of $6.26 compared to EPS of $1.41 during the same period in 2023.
Despite dropping sales, the company is expanding its operations, because of which the general sentiment around the stock is positive. It has opened 14 Jack in the Box restaurants in 2024 so far and is planning to enter the Chicago market in fiscal year 2025 and open up across 10 locations in partnership with franchisees. This is in addition to the fast-food chain’s entry into Florida next year.
Del Taco has also had 12 openings year-to-date and is projected to have close to 15 new restaurants this year. Its recent openings in Tallahassee, Port Orange, and Chesapeake have been a tremendous success, posting record first-week sales. At Del, the company is also seeing improved guest feedback, especially for its menu tests.
Late-night sales are also on the rise for both Jack and Del, indicating a potential for sales improvement ahead. Wall Street analysts have a consensus Buy rating on Jack in the Box Inc. (NASDAQ:JACK) and anticipate a median upside potential in its share price of over 38%. Amongst hedge funds tracked by the financial website, Insider Monkey, 16 held a stake in the company as of Q2 2024, making it one of the best fast food stocks to invest in right now.
10. Arcos Dorados Holdings Inc. (NYSE:ARCO)
Number of Hedge Fund Holders: 19
Arcos Dorados Holdings Inc. (NYSE:ARCO) is a McDonald’s franchisee that operates over 2,140 restaurants in four geographical divisions: Brazil, the Caribbean, North Latin America, and South Latin America.
The company reported a robust performance during the second quarter of 2024, with revenue increasing 6.8% on a YoY basis, driven by significant growth in the restaurant chain’s digital and off-premise channels. Guest traffic expanded for the 13th successive quarter, contributing to Arcos Dorados Holdings Inc. (NYSE:ARCO)’s sales growth.
The company’s quest for digitalization is yielding impressive returns and has become a major catalyst for its growth. Digital sales grew 24% year-over-year and represented 57% of systemwide sales, with Brazil leading the digitalization, having a digital sales penetration rate of 67% during the quarter. The ongoing digital transformation also produced strong results in the South Latin America Division, where digital channel sales grew between 25% and 50% in Chile, Colombia, Ecuador, and Uruguay.
Delivery and drive-thru sales in the off-premise channel surged 11% compared to last year and accounted for 45% of system-wide sales in Q2. Delivery sales were particularly strong in Brazil, Colombia, Costa Rica, Mexico, and Uruguay, growing between 25% and 45%. The company’s loyalty program launched in Brazil, Costa Rica, and Uruguay has been a success as well, registering around 11 million members by the end of July.
In October this year, Arcos Dorados Holdings Inc. (NYSE:ARCO) announced that it would exercise its option to renew the Master Franchise Agreement (MFA) with McDonald’s for another 20 years. The agreement, which will run from 2025 to 2045, is expected to include a royalty of gross sales of 6% for the first 10 years, 6.25% for the following 5 years, and 6.5% for the final five years of the agreement.
The renewed MFA represents a significant opportunity for future growth. Wall Street analysts have a consensus Buy rating on Arcos Dorados Holdings Inc. (NYSE:ARCO), with a median share price upside potential of 70%. Hedge fund sentiment on the stock remains bullish as well. According to Insider Monkey’s database for Q2 2024, 19 hedge funds had investments in the company, up from 14 at the end of the first quarter. Arcos Dorados Holdings Inc. (NYSE:ARCO) is one of the best fast food stocks to invest in right now.
9. Papa John’s International, Inc. (NASDAQ:PZZA)
Number of Hedge Fund Holders: 21
Papa John’s International, Inc. (NASDAQ:PZZA) is an American pizza chain that operates over 5,900 restaurants across 50 countries and territories, most of which are franchised outlets. It is one of the best fast food stocks to invest in right now, with 21 hedge funds tracked by Insider Monkey, holding a stake in the company as of Q2 2024.
Papa John’s International, Inc. (NASDAQ:PZZA) reported mixed results during its second quarter of the year. Live restaurant sales dropped 0.7% to $1.2 billion, driven by a 4% dip in North American comparable sales. Total revenue for Q2 was at $507.9 million, decreasing 1.3% year-over-year, primarily because of an $8.8 million decrease in commissary revenues in North America, fueled by lower transaction volumes and commodity prices.
Operating income was $28.2 million, down 19.2% from the same period in 2023. Adjusted operating income for the quarter stood at $38.4 million, increasing 4% year-over-year. The variance was due to international restructuring costs in the United Kingdom and non-cash impairment charges related to assets at certain domestic restaurants. Papa John’s International, Inc. (NASDAQ:PZZA)’s EPS for Q2 was logged at $0.37, falling below expectations of 51 cents per share.
Given the situation, Papa John’s International, Inc. (NASDAQ:PZZA) expects sales to remain under pressure throughout the third quarter, with sequential improvements anticipated starting Q4, driven by seasonal demand. Despite a challenging environment, there are still enough reasons to be bullish on the stock.
That said, international sales grew 3% during Q2, signifying positive trends overseas, excluding the Middle East. The restaurant chain plans on opening over 100 new outlets in fiscal year 2024. It is also closing down underperforming restaurants, to strengthen the franchisee base and enhance profitability. The management is also committed to investing in menu innovation and digital platforms to retain existing and attract new customers.
Wall Street analysts hold a Buy rating on Papa John’s International, Inc. (NASDAQ:PZZA). The stock has a median share price upside potential of 7.55% based on projections from 14 analysts.
8. The Wendy’s Company (NASDAQ:WEN)
Number of Hedge Fund Holders: 22
The Wendy’s Company (NASDAQ:WEN) is a parent corporation of the American fast food chain, Wendy’s. It operates through three business segments: Wendy’s U.S., Wendy’s International, and Global Real Estate & Development.
The Wendy’s Company (NASDAQ:WEN) announced financial results for the third quarter of 2024 on October 31. Revenue for Q3 grew 2.9% year-over-year to reach $566.7 million, driven by increases in advertising fund revenue, franchise royalty revenue, and franchise fees. Global system-wide sales rose by 1.8%, while same-restaurant sales saw a 0.2% increase. In addition, the company maintained its competitive position in U.S. markets within the QSR Burger category. Late-night and morning sales delivered strong performances during the quarter as well.
However, net income dropped 13.4% this year, from $58 million in Q3 2023 to $50.2 million. This was attributed to increased incremental investment in breakfast advertising and high general and administrative expenses. Depreciation and a higher effective tax rate also contributed to the dip in earnings for the quarter. The stock was down 6% following the announcement of these results for Q3 2024.
Despite the drop in net income, the fast food giant remains optimistic about its trajectory. The Wendy’s Company (NASDAQ:WEN) has made a robust start to the fourth quarter, with same-restaurant sales accelerating significantly in October, compared to the third quarter. The company expects full-year system-wide global sales growth to be around 3% and has reaffirmed its adjusted EBITDA outlook of $535 million to $545 million.
The Wendy’s Company (NASDAQ:WEN) is also seeing a surge in digital sales, having grown 40% from last year, led by a strong show by its U.S. segment. The company has made several enhancements of late to its app to improve user experience, which has seen the number of reward members enrollment grow from 43 million at the end of Q2 to 45 million as of the end of September. The fast-food chain is also expanding global operations at a rapid scale. It opened 64 new restaurants internationally during Q3, which has put the company on track to meet its goal of 250 to 300 openings for the full year.
According to Insider Monkey’s database for Q2 2024, 22 hedge funds had investments in Wendy’s, making it one of the best fast food stocks to invest in right now.
7. Restaurant Brands International Inc. (NYSE:QSR)
Number of Hedge Fund Holders: 22
Restaurant Brands International Inc. (NYSE:QSR) is a powerhouse in the restaurant industry. Headquartered in Toronto, Canada, it operates four major global food chains: Burger King, Tim Hortons, Popeyes, and Firehouse Subs. This diversified portfolio allows the company to target various customer segments across different markets.
In February, Restaurant Brands International Inc. (NYSE:QSR) declared its five-year growth outlook, under which it plans on having a minimum of 40,000 restaurants, $60 billion in system-wide sales, and $3.2 billion of adjusted operating income by 2028. As part of these efforts, Restaurant Brands International Inc. (NYSE:QSR) made two strategic acquisitions this year to further expand its already solid global footprint and bolster its revenue streams.
In May, the company announced that it had acquired Carrols Restaurant Group, Inc., the largest Burger King franchisee in the United States, having 1,023 restaurants across 23 states. It also operated 59 Popeyes restaurants in 6 states. The deal had a total enterprise value of around $1 billion. In addition to this, Restaurant Brands International Inc. (NYSE:QSR) would also spend another $500 million on reimaging over 600 Carrols restaurants before re-franchising them.
Later in June, the company announced two investments in China. The first involved the acquisition of Popeyes China from Tims China for an enterprise value of $15 million. The second was that it agreed to co-invest $50 million alongside Cartesian Capital to fuel the growth of Tims China.
These strategic investments in the world’s major quick-service restaurant markets have led to a bullish sentiment about the stock’s long-term potential. The company’s financial performance is also robust. During Q2 2024, Restaurant Brands International Inc. posted revenue of $2.08 billion, growing by over 17% year-over-year, due to a 5% increase in system-wide sales led by significant contributions from Tim Hortons and international operations. Adjusted diluted EPS was logged at 86 cents, representing an organic growth of 3.1% from last year.
Wall Street analysts have a consensus Buy rating on QSR and anticipate a share price upside potential, in median terms, of 18.6%. Restaurant Brands International Inc. (NYSE:QSR) is one of the best fast food stocks to invest in right now, with 22 hedge funds tracked by Insider Monkey having investments in the company, as of Q2 2024.
6. Yum China Holdings, Inc. (NYSE:YUMC)
Number of Hedge Fund Holders: 24
Yum China Holdings, Inc. (NYSE:YUMC) is a Fortune 500 restaurant company, headquartered in Shanghai, China, which operates and manages several well-known brands, such as KFC, Pizza Hut, and Taco Bell.
The company posted strong results in Q2 2024, setting numerous records, including a quarterly revenue of $2.68 billion, operating profit of $266 million, and diluted EPS of 55 cents. Total transactions grew 13%, with same-store transactions expanding 4%, driven by healthy traffic. Yum China Holdings, Inc. (NYSE:YUMC) attributed the success this quarter to its ability to attract new and existing customers through a broadened price range that offers quality offerings at affordable rates. The company also ended the quarter in solid liquidity, with $3.1 billion in net cash.
In May, Yum China Holdings, Inc. (NYSE:YUMC) launched the first Pizza Hut WOW store in Guangzhou, a cheaper version of the chain, with the menu priced significantly less than traditional Pizza Hut restaurants in the country. The concept behind this is to cater to price-conscious diners in China, as the economy struggles. The company has converted around 100 Pizza Hut restaurants into WOW stores and intends to achieve 200 outlets by the end of the year.
This was the most profitable quarter for Pizza Hut, because of the success of WOW stores and the company’s efforts in enhancing operational efficiency which it achieved by simplifying menu and kitchen operations, which reduced production preparation time. Yum China Holdings, Inc. (NYSE:YUMC) has also added innovative offerings to its menu, like the Pizzaburger, which proved a great success and outsold the Hawaiian Pizza, one of their synergies.
Another business segment that contributed to growth during the quarter was K-Coffee, a coffee brand operating adjacent to KFC restaurants in China. Its sales have exceeded RMB 1 billion (approximately $140 million) during the first half of the year, registering a 26% increase from 2023. The company has sold over 120 million cups between January and June, up 36% year-over-year. Yum China Holdings, Inc. (NYSE:YUMC) had rolled out around 200 K-Coffee stores until the end of June, with plans to open between 500-600 by the end of the year.
Yum China Holdings, Inc. is one of the best fast food stocks to invest in right now. Wall Street analysts have a consensus Strong Buy rating on the stock, with a median share price upside potential of 14%.
5. Wingstop Inc. (NASDAQ:WING)
Number of Hedge Fund Holders: 31
Wingstop Inc. (NASDAQ:WING) is an American restaurant chain that sells chicken wings. According to CNBC, around 98% of its restaurants are operated by independent franchisees. It is one of the best fast food stocks to invest in right now, with 31 hedge funds tracked by Insider Monkey holding stakes in the company.
On October 30, Wingstop Inc. (NASDAQ:WING) announced financial results for the fiscal third quarter of 2024. Revenue totaled $162.5 million, growing 38.8% year-over-year. Royalty revenue, franchise fee, and other revenue expanded by $21.2 million in Q3, driven by same-store sales growth of 20.9% and net franchise restaurant openings since last year.
The surge in same-store sales, coupled with around 350 new restaurant openings over the last 12 months, has resulted in system-wide sales growing by 39%. Adjusted EBITDA was posted at $53.7 million, up 39.5% year-over-year. EPS was logged at 88 cents per share, translating to a 35.4% increase from the same quarter in 2023.
While talking to CNBC in late August, CEO Michael Skipworth stated that Wingstop Inc. (NASDAQ:WING) has leaned into live sports advertisements, which analysts at the business news channel believe is one of the reasons why the company is outpacing its competitors in the industry, as chicken wings remain a popular snack with watching live sports.
Moreover, through effective supply chain strategies, Wingstop Inc. (NASDAQ:WING) has also managed to control food costs despite commodity price volatility, offering brand partners predictability and strengthening unit economics. The company’s unit growth for Q3 was also an impressive 17%, helped by 100 new restaurant openings in the third quarter. It now expects to open a total of between 320 to 330 net new restaurants for the full year, offering tremendous opportunities for revenue growth ahead.
Wall Street analysts have a consensus Buy rating on the stock and anticipate a median share price upside potential of 28%.
4. Shake Shack Inc. (NYSE:SHAK)
Number of Hedge Fund Holders: 31
Shake Shack Inc. (NYSE:SHAK) is a popular American fast-food chain that started as a hot dog cart at Madison Square Garden in the early 2000s. Over the years it has expanded to over 550 locations across the globe and is known for its beef burgers, crispy chicken, milkshakes, and more. It is one of the best fast food stocks to invest in right now.
The stock has surged by over 9% since the announcement of financial results for Q3 on October 30, as Shake Shack Inc. (NYSE:SHAK) beat earnings estimates. Total revenue for the quarter climbed 14.7% from last year to reach $316.9 million, while system-wide sales were posted at $495.1 million, up 12.8% year-over-year. Same-Shack sales growth was recorded at 4.4%, making this the 15th successive quarter of positive growth.
CEO Rob Lynch credited the success in Q3 to the company’s ‘continuous culinary innovation’. Some examples of this include Shake Shack Inc. (NYSE:SHAK) launching its summer barbecue menu for the Memorial Day weekend and then later, in September, bringing back the Black Truffle Burger and Chicken Sundays, both of which are extremely popular among consumers. These differentiated culinary experiences help the fast food chain stand out in today’s fierce value wars and also aid in spreading brand awareness.
Shake Shack Inc. (NYSE:SHAK) has a significant number of sales-driving initiatives and campaigns that it plans on leveraging ahead. There are three that stand out, starting with its strategic production innovation calendar at first. The second is the launch of its loyalty platform, and lastly the operational enhancement plans in the pipeline to enhance customer experience, improve throughput, and lower service times.
Lynch spoke to CNBC after the earnings beat and vowed to expand Shake Shack Inc. (NYSE:SHAK) both domestically and internationally, and noted that there were still plenty of markets the restaurant chain could tap into. The company opened 17 new restaurants in the third quarter, of which eight were domestic and company-owned. It is on track for 75 new openings for the full year and plans for 80-85 new units in 2025.
Looking ahead, Shake Shack Inc. (NYSE:SHAK) anticipates Q4 revenue in the range of $322.6 million to $327 million, representing a projected uptick of 12.7% to 14.2% from last year. Full-year sales are expected at $1.25 billion, up 15% year-over-year.
3. Yum! Brands, Inc. (NYSE:YUM)
Number of Hedge Fund Holders: 36
Yum! Brands, Inc. (NYSE:YUM) is an American multinational fast-food corporation that operates around 58,000 restaurants worldwide under the umbrella of KFC, Pizza Hut, Taco Bell, and Habit Burger & Grill.
The company is experiencing a downturn in same-store sales due to the ongoing conflict in the Middle East, which has resulted in slightly weaker demand amid calls for the boycott of Western products. Sales have been most affected in Middle Eastern countries, Malaysia, and Indonesia, with the impact of the conflict on sales also felt in several other countries. Moreover, cost-conscious consumers also present headwinds to Yum! Brands, Inc. (NYSE:YUM) as people worldwide become more careful about their spending.
Despite these pressures, the fast-food corporation reported robust results for the second quarter, declared on August 6. Worldwide systems grew by 3%, while core operating profit increased by 10%, driven by strong performances by the Taco Bell and KFC brands. Both combined delivered a system sales growth of 5% led by an 8% unit growth.
KFC in international markets (excluding China) that were not impacted by the Middle East crisis, has witnessed mid-single-digit growth in same-store sales. The brand also experienced significant growth in digital sales, which grew 20% during the quarter, with an impressive 40% surge in kiosk sales. The company is also undergoing massive expansion and acquired 216 KFC restaurants in the United Kingdom and Ireland, which has put KFC on track for 10,000 stores globally by the end of 2024.
Taco Bell’s performance has been impressive as well. It registered a 7% increase in system sales in the US, led by Cantana Chicken delivering above expectations. Same-store sales in the country grew 5%, outpacing the broader QSR market. It also benefited immensely from the launch of other innovative menu items like Secret Aardvark fries and Cheez-It.
Yum! Brands, Inc. (NYSE:YUM) is confident of delivering strong growth in 2025 as inflation moderates and margins grow. Wall Street analysts expect an uptick of 9.74%, in median terms, in its share price. Hedge fund sentiment is improving as well, with 36 hedge funds, amongst those tracked by Insider Monkey, having investments in the company at the end of the second quarter of 2024, up from 35 in Q1. It is one of the best fast food stocks to invest in right now.
2. Domino’s Pizza, Inc. (NYSE:DPZ)
Number of Hedge Fund Holders: 52
Domino’s Pizza, Inc. (NYSE:DPZ) is an American pizza company with a significant global presence, operating around 20,500 stores in over 90 markets.
In December 2023, Domino’s Pizza, Inc. (NYSE:DPZ) announced a five-year strategy called ‘Hungry for MORE’, which would serve as a blueprint for driving sales, expanding units, and improving profits. The acronym MORE implied “most delicious food”, “operational excellence”, “renowned value”, and “enhanced by best-in-class franchisees and team members.”
CEO Russell Weiner, while speaking to the Q3 earnings call last month, stated that while drafting this strategy, Domino’s was aware of the looming consumer spending crisis in 2024, and the company focused on offering the strongest value to consumers through promotional offerings, giving them ‘more for less’. The strategy has proven to be a great success.
Retail sales have surged 6.6% during the first three quarters of 2024, while the broader QSR pizza industry has grown by only 2%. Q3 was the fourth successive quarter of same-store sales growth since the launch of the strategy in December last year, and the fourth straight quarter of positive order count growth.
Domino’s Pizza, Inc. (NYSE:DPZ) has also been expanding at a rapid scale. Between 2015 and 2023, the company opened around 1,750 new stores. This was almost as much as the stores its pizza competitors in the QSR industry closed during the period. This impressive rate of opening is likely to prove to be the catalyst driving future order count growth, as customers continue to repeat purchases because of the value offered by Domino’s.
In Q3 2024, the company posted $52.8 million in revenue, up 5.1% from last year. This was attributed to higher order volumes and an increase in Domino’s food basket pricing to stores. US franchise advertising and US franchise royalties and fees also increased during the quarter. Income from operations increased 5% year-over-year. EPS was logged at $4.19, comfortably beating expectations of $3.71 per share.
Considering a robust performance over the past year, Wall Street analysts have a consensus Buy rating on DPZ, with a median share price upside potential of 11.6%. Domino’s Pizza, Inc. (NYSE:DPZ) is one of the best fast food stocks to invest in right now, with 52 hedge funds, amongst those tracked by Insider Monkey, having a stake in the company as of the end of Q2 2024.
1. McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Holders: 67
McDonald’s Corporation (NYSE:MCD) is one of the most popular fast-food chains in the world. The American multinational company operates in approximately 40,000 locations across over 100 countries. According to CNBC, around 95% of its restaurants are owned by independent local business owners.
2024 has been a tough year for the company. The brand’s boycott, sparked by the conflict in the Middle East, has affected its same-store sales and subsequently hurt its earnings. Sluggish consumer spending across the world has also not helped.
The recent E. coli outbreak linked to its Quarter Pounder hamburgers, which has already infected 75 people in the US, is a fresh setback for the company. Customer visits to McDonald’s Corporation (NYSE:MCD) have dropped by 9% nationwide, CNN reported on October 29. However, the fast-food chain is confident that its $5 value meals and chicken burgers will win back customers.
Last week, McDonald’s Corporation (NYSE:MCD) announced financial results for the fiscal third quarter of 2024. Global comparable sales dropped 1% year-over-year in Q3 – the biggest decline in four years and more than twice the magnitude projected by analysts. This was preceded by a 1% drop during the April-June quarter, marking two successive quarters of contraction. While markets in the United States returned to growth (0.3%) during the quarter, sales were down by 2.1% in international markets, led by France and the UK. Net income for the quarter was $2.26 billion, dropping 3% from last year. However, its earnings per share of $3.23 beat expectations by three cents.
Looking ahead, McDonald’s Corporation (NYSE:MCD) expects challenges to remain heading into 2025. However, the executives are confident that the E. Coli outbreak will not have any material impact on the business. They are also hopeful that their promotional value meals would lure customers back to the burger chain. Wall Street analysts also expect the stock to bounce back once the headwinds are over. They have a consensus Buy rating on MCD, with a median share price upside potential of 11%.
Despite pressures, McDonald’s is the best fast food stock to invest in right now, according to hedge fund sentiment. As of Q2 2024, 67 hedge funds, amongst those tracked by Insider Monkey, had investments in the company.
Overall, MCD ranks first among the 11 best fast food stocks to invest in right now. While we acknowledge the potential of fast food companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MCD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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