McDonald's Was Left Behind in 2025's Rally: Are Shares a Buy?

In a tough year for fast-food icons, Ronald McDonald stood tall.

While fourth-quarter earnings for 2025 have yet to be released, McDonald's (NYSE: MCD) grew its U.S. same-store sales by 2.4% in Q3, no small feat at a time when fast food same-store sales fell by 1.1% across America. Internationally, the numbers were even more resilient, with McDonald's reporting 3.6% same-store sales growth globally.

Yet McDonald's severely lagged the broader stock markets, returning 5% compared to the S&P 500's 17% rise. While McDonald's handily outperformed the industry, considering that the AdvisorShares Restaurants ETF dipped 7% in that time, that talking point is cold comfort for investors who felt left behind in the rally.

Is McDonald's in for another year of underperformance? Here's what the numbers suggest.

Image source: Getty Images.

"Pressures will continue well into 2026"

In the company's most recent earnings call, CEO Christopher Kempczinski struck a note of caution. While U.S. same-store sales ticked up overall, he noted that quick-service restaurant traffic had declined by almost double digits in Q3, part of a nearly two-year trend. In a mirror image of that, visits from higher-income customers increased by almost the same percentage.

Reading between the lines, Kempczinski's takeaway seemed to be that McDonald's faces an imperative: The company must do more to stop the slide from lower-income customers, who still make up a crucial block of its customer base.

The CEO said that McDonald's "heard its customers loud and clear" on the need to improve value perceptions and deliver more value and affordability. As steps toward this, in September McDonald's introduced Extra Value Meals, a nationally advertised $5 Sausage McMuffin with Egg Meal and the $8 Big Mac Meal. In November, it rolled out two more value deals in the $5 Sausage Egg and Cheese McGriddles Meal and the $8 10-piece Chicken McNuggets Meal.

The company will assess whether these value deals bring back lower-income traffic, and early signs are promising, according to Kempczinski. Another encouraging sign is the success of value deals in the company's international operated markets, which are partly credited with delivering strong performance for stores outside the U.S.

These value deals, combined with the Daily Double meal deal announced in July, make up the McValue platform that McDonald's is counting on to woo back pinched customers.

One danger for McDonald's is that these deals eat into profits, but there's no sign of that happening so far. Total restaurant margin dollars climbed by 4% year over year last quarter, the first time that they topped $4 billion in the company's history. McDonald's adjusted operating margin came in at 47.2%, up from 46.7% a year ago.

The fastest growth in McDonald's history

In late 2023, McDonald's laid out an ambitious plan to open 10,000 new stores by 2027. It's on track to deliver on its 2025 targets as of Q3, along with its goal of 50,000 restaurants globally by 2027 (it has just over 44,000 locations today).

Believe it or not, this roughly 25% growth in store count in just a few years would be the fastest growth in McDonald's history. And given Kempczinski's reassurances, the next earnings call on Feb. 9 will be an important one, as the company discloses whether its 2025 goal of 1,800 net restaurant additions was met.

In the meantime, McDonald's shares aren't priced as if the company were undergoing historic expansion. With a price-to-earnings ratio of just 26, shares trade at roughly a 10% discount relative to the S&P 500 average. The company pays a dividend yield of 2.5% that is roughly double what the average S&P 500 company pays, and that's highly likely to grow this fall, if the company announces another dividend increase as expected. Management should be determined to do so since that would mark McDonald's 50th annual dividend increase, giving it Dividend King status that only around 1 in 1,000 companies have achieved.

From pinched consumers to challenging macroeconomic conditions, McDonald's faces obstacles that have plagued the entire restaurant industry. But its growing margins, growing dividend, and rapid expansion make its stock a compelling long-term play. It may well underperform the market once more in 2026, especially if technology stocks continue to drive this four-year bull market. But for long-term investors prizing growth and income, McDonald's is a buy.

William Dahl has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.