McDonald’s shares rise as turnaround shows promise

Third-quarter earnings revealed encouraging signs within the company’s domestic operations. Same-store sales in the U.S. decreased by 0.2%, surpassing Wall Street’s projection of a 0.5% decline. Sales returned to growth in September after experiencing drops in July and August, with positive trends continuing into October.

Following these results, McDonald’s shares jumped 6.5% on Wednesday. This increase builds upon a broader recovery from lows reached in early October, representing a gain of over 20%. Earlier this year, the stock had previously fallen by roughly a third from its record high, influenced by weakening U.S. sales and increased competition.

“We’re witnessing progress at McDonald’s, which explains the stock’s improved performance compared to a few months ago,” Cramer stated. He expressed continued confidence in the company, anticipating further price increases.

While initially cautious on October 1, labeling McDonald’s a “show me” story due to concerns about renovation costs and franchisee support, Cramer maintained a positive outlook and advocated for buying the stock at that time.

To address challenges, McDonald’s prioritized affordability during the September quarter, reintroducing digital promotions and emphasizing value-driven marketing, including meal deals priced at $5 and $6. CEO Chris Kempczinski noted that these actions helped stabilize customer traffic.

Despite the positive developments, the company fell short of revenue expectations, and weaker performance in France impacted international results. McDonald’s intends to expand affordable options, enhance digital promotions, and focus on improving food quality and service. The company is currently testing two new value menus, with plans to implement the more effective option nationwide by early 2027.

Cramer cautioned that future stock appreciation will depend on consistent execution rather than solely on attractive pricing, as the stock’s valuation was particularly appealing at its earlier lows.