McDonald’s Corporation (NYSE:MCD) and Starbucks Corporation (NASDAQ:SBUX) operate in a related industry. Both offer consumer food-related products, which get affected almost equally in tight economies. For this reason, an investor looking for exposure to such sectors has MacDonald’s and Starbucks in mind. We believe both stocks carry unique attributes and subtle differences that should be considered.
Looking at McDonald’s, the stock has demonstrated defensive features this year. The stock has less than 2% losses year-to-date as most equities crashed by double digits. In its latest quarter, the company’s per-share earnings came at $2.55. That was more than $2.37 the prior year and $2.47 estimates. The higher earnings came despite lower and missed revenues of $5.72 billion in the quarter. It underlined McDonald’s ability to override the high inflation environment and deliver results.
On the contrary, Starbucks has hit a snag this year as most stocks tanked. The YTD return is -27.34%, almost three times worse than losses in the Nasdaq composite. The losses come after the Covid-19 slowdowns and increased scrutiny of its products in China. Starbucks reports earnings on August 2 after the market close. Analysts are not very optimistic and project $0.77 per share earnings. The projected earnings are lower than $1.01 last year.
MacDonald’s and Starbucks are on an uptrend
Source – TradingView
Technically, both MacDonald’s and Starbucks are bullish. MCD gains in a month are 6.68%, which accelerated after the quarter results. The stock has broken past key resistance at $253.
Starbucks’ returns in the month are higher at 10.98%. The stock has also surged above a key level at $80.00.
Concluding thoughts
McDonald’s stock offers better assurances for investors still wary of recession. It offers more predictable short-term returns. Starbucks faces risks of a downturn if recession risks remain. However, it stands to return more if the economy recovers due to its beaten-down price.
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