McDonald's vs. Starbucks Stock: Which Is a Better Investment?

18 Feb 2024

Yahoo Finance Australia

ozgurdonmaz / Getty Images

When it comes to investing in top restaurant stocks, fast food titan McDonald’s (MCD) and coffee giant Starbucks (SBUX) are two compelling choices. But which one is the better buy in early 2024?

Starbucks - Figure 1 — Photo Yahoo Finance Australia

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Let’s compare their recent financials, growth prospects, valuation metrics, and key risks to determine the superior investment.

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Comparing the Numbers

McDonald’s has maintained a slight edge over Starbucks in terms of revenue growth and customer traffic trends, according to the most recent numbers available to the public. In McDonald’s fourth quarter of 2023 financial performance report, ending Dec. 31, 2023, global comparable sales increased 3.4% (as well as a whopping 9% year-over-year), reflecting positive comparable sales across all segments — U.S. by 4.3%, international operated markets by 4.4% and international developmental licensed markets by 0.7%. The latter was negatively impacted by the war in the Middle East, per the press release.

For Starbuck’s Q1 Fiscal 2024 (also ending Dec. 31, 2023), consolidated net revenues reached a record $9.4 billion, up 8% year-over-year. Comparable store sales increased 5% globally, with a 5% increase in North America and a 7% increase internationally. This represents continued strong performance across both the company’s domestic and international segments.

McDonald’s is everywhere, even in small towns and rural areas. This gives them an advantage by being so convenient and easy to reach. Starbucks is trying to grow more by adding drive-thru lanes, delivery options, and mobile ordering to make it easier for customers to get their product. Both McDonald’s and Starbucks have been able to raise their prices a bit to help cover their higher costs lately.

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It’s clear that both Starbucks and McDonald’s are industry titans, with financial results that reward shareholders and fuel their growth. While operating in the food and beverage landscape, these two powerhouses are forces to be reckoned with.

McDonald’s, with its iconic golden arches, has mastered the art of operational efficiency and menu innovation. Its commitment to streamlining processes and introducing new offerings has allowed the brand to maintain a loyal following. Simultaneously, Starbucks has carved out a niche in the premium coffee realm, offering an experience that consumers love.

Despite economic challenges, both McDonald’s and Starbucks have consistently demonstrated resilience and the ability to adapt. Their strong financial performances, combined with their responsiveness to market shifts, makes them both attractive investments with upside potential for would-be shareholders.