MCD: GLP-1 Headwinds vs Franchise Moat

At 25.91x trailing earnings, McDonald's sits at a premium to the broader market but roughly in line with consumer staples peers that carry similarly defensive cash flows. The 52-week range of $283.47–$341.75 tells the more interesting story: the stock has already repriced 10% lower from its peak, compressing what was a richer multiple in mid-2025.

Full-year 2025 EPS came in at approximately $11.95, which means the current price implies a forward multiple close to 25x if analysts are right that 2028 quarterly EPS reaches $3.99 (roughly $16 annualised). That growth trajectory — from $11.95 today to ~$16 by 2028 — is a 34% EPS improvement over three years, or about 10% per year. Achievable, but it requires the GLP-1 and beef-price headwinds to resolve without a sustained top-line hit.

The franchise model provides a genuine valuation floor. McDonald's collects royalties and rent from franchisees regardless of beef spot prices. That insulation is why the stock rarely trades below 20x earnings for long. At $283.47 — the 52-week low — it briefly did, and buyers showed up. The current level is defensible on a sum-of-parts basis, but upside from here requires a catalyst, not just patience.

Full-year 2025 revenue landed at approximately $27.89B, with Q3 being the strongest quarter at $7.08B. The sequential dip to $7.01B in Q4 is consistent with normal seasonality, but net income compression is worth flagging: Q3 net income was $2.28B versus Q4's $2.16B, a 5.3% quarter-on-quarter decline that runs slightly hotter than the 1% revenue drop.

Margin pressure is the culprit. When beef prices rise and McDonald's responds with value promotions — the $5 Meal Deal and its regional equivalents — franchisee cash flows tighten and the royalty base grows more slowly. Corporate earnings feel the squeeze indirectly through lower comparable sales growth and franchisee health.

Q1 2025 was notably softer at $5.96B revenue and $1.87B net income, reflecting a post-holiday consumer pullback and the early-year pricing caution that preceded the value wars. The recovery into Q2 and Q3 showed the chain can bounce — but Q4 flattening suggests the second-half tailwind has faded. Next earnings are April 30, 2026. Analysts will watch same-store sales and franchisee margins closely for early 2026 signals.

Free cash flow per share across 2025: $2.63 (Q1), $1.76 (Q2), $3.39 (Q3), $2.29 (Q4). Annual total is roughly $10.07 per share — an FCF yield of approximately 3.3% at $308.85. That is modest for a capital-light franchise business, and reflects the elevated capex that comes with accelerating restaurant modernisation and digital infrastructure.

The FCF yield alone does not scream deep value. But McDonald's layered on top of that yield a consistent dividend payout and share buyback program that have compounded shareholder returns for decades. The balance sheet carries meaningful debt — the price of running a sale-leaseback real estate model — but interest coverage is robust given the predictability of royalty and rent income.

The Q3 FCF spike to $3.39/share shows the earnings engine is not broken. Q2's $1.76 was the soft spot, likely tied to higher promotional spend and reinvestment timing. The underlying cash generation capacity of this franchise network, spread across 40,000+ locations in 100+ countries, is not under structural threat from GLP-1 drugs or a temporary commodity cycle.

The bear case starts here. GLP-1 drugs — Ozempic, Wegovy, and the next generation of appetite suppressants — are genuinely changing eating behaviour for a growing cohort of users. Studies show reduced caloric intake and fewer impulsive food purchases among GLP-1 users. Fast food is a high-frequency, impulse-driven category. If 10–15% of the US adult population is on these drugs within five years, that is a structural headcount reduction in the addressable market.

McDonald's response has been to lean harder into value and digital loyalty. The mobile app now drives a significant share of transactions, building a direct relationship that reduces churn and enables upsell. Digital loyalty programs are a GLP-1 partial offset — they retain customers who are eating less but still eating out. But value promotions to retain price-sensitive customers directly compress margins.

Analyst consensus projects 2028 quarterly revenue of $8.34B — a 19% uplift from Q4 2025's $7.01B over roughly three years. That is achievable through international expansion (McDonald's is underpenetrated in several emerging markets) and menu premiumisation outside the value war battleground. The bull case is that GLP-1 effects are overstated for a brand that serves 69 million customers daily — scale provides a cushion that smaller chains lack entirely.