On June 9, 2023, American Century Companies Inc. announced they had reduced their position in McDonald’s Co. (NYSE:MCD) by 61.3% during the fourth quarter of the previous year. This revelation came from the company’s most recent SEC filings that showed their ownership to be at 53,627 shares of the fast-food giant’s stock after selling 84,864 shares during the said period. According to those filings, American Century Companies’ holdings in McDonald’s amounted to $14,132,000.
McDonald’s last posted its quarterly earnings data on Tuesday, April 25th, providing a glimpse into how the company has been faring recently. The fast-food behemoth recorded $2.63 earnings per share (EPS) for the quarter; this is higher than analysts’ consensus estimates of $2.31 by $0.32). Similarly, its revenue was better than anticipated ($5.90 billion) as compared to the consensus estimate ($5.58 billion). However, it is important to note that while McDonald’s had a net margin of 29.36%, It did have a negative return on equity of 124.87%. Quarter-over-quarter revenue increased by 4.1%, and EPS was reported at $2.28 – considerably lower than Q1-2023 figures.
McDonald’s has been scrutinized by several research analysts regarding its performance over time through various reports issued since April this year. For instance, BMO Capital Markets raised McDonald’s price objective from $300 to $325 and gave it an “outperform” rating on Wednesday, April 26th; Guggenheim upped their target price from $305 to $325 and tagged it with a “buy” rating on the same day; Truist Financial upped their projection from$318to$327 and marked it as “buy” on Tuesday,April25th. Similarly,UPS Groupraised their target price from$305 to $330 and gave the stock a “buy” rating on Wednesday, April 26. With the average rating of McDonald’s being Moderate buy with an average tag of $306.83, five investment analysts have labeled it as a hold while twenty-four analysts have tagged it as a buy.
American Century Companies’ decision to reduce its position in McDonald’s could be due to the company’s recent performance decline that saw them only report EPS of $2.28 in the first quarter of 2023 compared to $2.63 for Q2- 2023. Meanwhile, the company’s investments worth more than $14 million maintain above-average value, leading some investors to speculate about future performance or whether American Century Companies will increase its holdings after such a significant sell-off earlier this year. Time will tell how these events influence McDonald’s long-term standing in the market and performance further down into the future.
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Assessing the Impact of Insider Selling and Institutional Investment on McDonald’s Performance
Insider Selling and Institutional Investment: What It Means for McDonald’s
McDonald’s Company has recently been subject to several research analyst reports, indicating that the fast-food giant’s stock is expected to perform well in the year ahead. Five investment analysts have rated the stock with a hold rating, while twenty-four have rated it a buy, resulting in an average rating of “Moderate Buy” and an average price target of $306.83.
Despite this positivity from analysts, some insiders at McDonald’s seem to have different opinions on the company’s future potential. SVP Catherine A. Hoovel and CMO Edith Morgan Flatley both sold shares of the firm’s stock, with Hoovel selling 840 on May 1st and Flatley selling 2,000 shares on May 30th. For context, over the last 90 days insiders sold a total of 12,667 shares of company stock worth $3,725,307. It seems that these insiders may not share the optimistic views of their fellow investors.
Meanwhile, institutional investors are continuing to show solid support for McDonald’s Co., with hedge funds and other institutional investors adding or reducing their stakes in the business throughout Q4 of last year. In fact, according to data released on June 9th 66.86% of McDonald’s stock was owned by institutional investors at that time.
It does not necessarily follow that insider selling is a cause for concern – there could be many reasons why senior executives are taking profits without suggesting negative opinions about the company’s prospects – similarly institutional ownership can often be seen as a sign of investor confidence rather than risk.
The market didn’t seem overly concerned with either revelation based on current share prices; despite fluctuating values around $290 per share during June it managed stable growth of around 8% YoY which would suggest that despite recent insider sales predictions about future stock value remains high and optimism continues among most investors.