McDonald’s Stock Drops on Sales Miss, and This Canadian Stock Could Be Next

McDonald’s (NYSE:MCD) stock fell after reporting lower sales, which could continue for the year, but it’s another story for this Canadian stock.

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McDonald’s (NYSE:MCD) shares dropped on Monday after the company reported earnings that showed that sales missed estimates. It was the first quarterly sales miss in nearly four years due to weak sales in the Middle East, China, and India.

So, let’s look at what happened and if another Canadian stock could be next.

What happened?

A “meaningful business impact” was touted as the reason for the drop in McDonald’s Middle East market, as protests and boycott campaigns against the company drove sales lower. This occurred both inside and outside the region, where the Israel-Hamas conflict continues to rage on, with McDonald’s perceived to hold a pro-Israeli stance.

The stock widely missed 5.5% sales growth estimates, rising just 0.7%. It was a huge hit, given that the international market accounted for 10% of total revenue in 2023. What’s more, the impact is likely to continue, according to management, not just for the next quarter, but even two.

It wasn’t only the Middle East either, with China also seeing weak sales. Given this is McDonald’s stock’s second-largest market, it certainly felt the blow. Moreover, even the United States market was showing signs of weakness, with stores seeing a 13% drop in traffic in October alone. So, with uncertainty continuing, could we see similar performance from other fast-food chains in Canada?

If you’re looking at Canadian restaurant stocks, the first one you’re going to come across is certainly going to be Restaurant Brands International (TSX:QSR). RSI stock has been doing incredibly well over the last year, even amidst all the struggles across the border.

RBI stock currently holds a market cap of $46.95 billion as of writing, with shares surging past 52-week highs after reporting recent earnings. The company has been buying up the most popular chains in the country, including Burger King, Tim Hortons, Popeyes Louisiana Kitchen, and, most recently, Firehouse Subs.

Yet, if investors think it’s going to slow down, think again. The company has been expanding and is now in over 100 countries around the world. Most of these, however, are through its Burger King segment. Therefore, there is still more room to grow. So, what did the company say about that in earnings, and should investors be worried?

Earnings beat

Not only is the stock looking to grow organically, but RBI stock recently announced the acquisition of Burger King’s largest franchisee, Carrols Restaurant Group. The US$1 billion deal would allow the stock to accelerate its turnaround plan for Burger King and should remain a key focus of the next year.

Back in Canada, Tim Hortons will likely continue to see a focus on food and beverage quality. That and its digital engagement growth should support further strong performance in the next few quarters. So, not only should RBI stock not have its shares fall, but it should rise even further ahead of its competitors.

RBI stock is expected to report its earnings on Feb. 13, so definitely look out for any notes about its global operations. Yet overall, even if sales drop, the company’s acquisition and future plans should keep shares moving forward.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Restaurant Brands International. The Motley Fool has a disclosure policy.

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