To The Moon

$McDonald's(MCD)$ is expected to release earnings on Feb 05, 2024 before the market opens (BMO).

The price increase by McDonald due to the minimum wage law passed in California would be something that investors should look out, how much is the increases?

This could have some impact on how their operating expenses would perform with the revenues coming in. In Oct earnings call McDonald’s CEO did mentioned that there are going to be some element of that that does need to be worked through with higher pricing.

These will be seen across the franchisees and their teams there are going to be looking at around productivity, how all of that plays out, will certainly be a hit in the short term to franchisee cash flow in California.

Technical is showing an uptrend for McDonald, as we can see that fo past 20 trading sessions, we could see MCD trading in zig-zag. still trending above the 50-day MA period. I would think MCD could maintain this upside trend into earnings.

Significant Sales Of Shares By Insiders Last 3 Months

Over the last three months, there have been significant insider selling at McDonald's. Insiders ditched US$3.6m worth of shares in that time. This may suggest that some insiders think that the shares are not cheap.

Hedge Funds Holdings Sales Of Shares

If we look at how hedge funds are moving their share ownership, McDonald's insiders own about US$241m worth of shares (which is 0.1% of the company).

So the concern we need to look at is not so much the insiders, it should be other shareholders like Hedge fund and individual shareholders. The positive sentiment from the shareholders holdings look like confidence in McDonald to trend higher.

McDonald (MCD) Last Earnings Report

MCD last reported earnings on 30 Oct 2023 before the market opened (BMO). MCD shares gained +1.7% the day following the earnings announcement to close at 258.60. Following its earnings release, 97 days ago, MCD stock has drifted +14.9% higher.

From the time it announced earnings, MCD traded in a range between 258.20 and 302.39. The last price (297.05) is closer to the higher end of range.

Estimated implied straddle for upcoming earnings is 3.0%. We could be seeing a small upside around 1% post earnings as investors are still confident about McDonald future.

McDonald (MCD) Post Earnings Movement

The options market overestimated MCD stocks earnings move 83% of the time in the last 12 quarters. The predicted move after earnings announcement was ±2.9% on average vs an average of the actual earnings moves of 1.7% (in absolute terms).

This suggest price volatility for MCD trading before the earnings, but there should be a small upside move post earnings.

McDonald (MCD) Earnings Implied Volatility Crush

MCD's last earnings implied volatility (IV30) going into earnings was 23.2. The last time MCD released earnings, the implied volatility dropped to 16.7, resulting in an implied vol crush of 28%. 5 days after earnings, the 30 day IV was 14.1.

• Average Implied Volatility Crush For MCD Earnings: 13%

• Average 30 Day Implied Volatility 1 Day Before Earnings: 21.0

• Average MCD 30 Day IV for the Day of Earnings: 18.3

• Average 30 Day Implied Volatility 5 Days After Earnings: 16.9

McDonald (MCD) Post Earnings Announcement Drift

MCD share price has drifted up 14.9% post earnings announcement. Using the last 12 quarters data, the average drift between earnings announcements is 1.5%. The current drift represents a positive 2.3 standard deviation move.

• Current post earnings announcement drift: 14.9%

• Historical average post earnings announcement drift: 1.5%

• Historical post earnings drift standard deviation move: ±6.6%

Summary

I would think the insiders sales of shares should have minimal impact on McDonald share price, what would be more interested are the hedge funds and investors sentiment and confidence.

The price increase in California should constitutes a small part of the operating expenses if need to increase. The mitigation effort should be manageable.

Overall I would think McDonald could make a small upside move post earnings.

Appreciate if you could share your thoughts in the comment section whether you think McDonald could make a small upside move post earnings.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.