Companies Serving Up Good Earnings Remain a Buy

The market’s selloff in the past few months has largely occurred between earnings seasons. The past few weeks, we’ve seen companies report solid earnings.

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  • The market hasn’t been in a position to reward those earnings yet, but could in the weeks ahead as stocks form a base and look to move off their current prices into the end of the year. Picking through today’s earnings winners could lead to solid returns in the months ahead.

    For investors who are still cautious about markets, consider McDonald’s (MCD). The company reported a big jump in same-store sales, a key metric for the industry. And higher prices helped boost returns.

    McDonald’s tends to grab more market share in a down economy, making for an ideal place for investors to stay in stocks right now. Over time, the company’s growing dividend and rising earnings tend to make up for short-term market drops like the recent one that’s hit shares.

    Shares now trade at 20 times forward earnings, a reasonable price for the industry-leading brand.

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  • Action to take: Investors may like shares here. The stock is still well off its summer highs, and could see double-digit returns in its shares while it also pays a 2.6 percent dividend.

    For traders, the January 2024 $280 calls, last going for about $2.40, could see mid-to-high double-digit returns from a year-end rally in shares.


    Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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