Investing.com -- Wells Fargo said McDonald’s (NYSE:MCD) is its top Q1 restaurant earnings idea, citing defensive qualities, favorable near-term setup, and signs of improving sentiment despite soft traffic trends and weak comparable sales.

Q1 “shortfalls (MCD, SBUX, CMG, etc.) shouldn’t surprise at this point,” analysts wrote. “But as new risks emerge (tariffs, re-inflation, global sentiment, etc.), it’s hard to call Q1 de-risked.” 

Still, the firm sees McDonald’s as relatively well-positioned among global quick-service peers.

Wells Fargo expects McDonald’s to report Q1 earnings on May 1 with EPS of $2.65, just below the Street estimate of $2.67. 

Its forecast includes total revenue of $6.06 billion, down 1.8% year-over-year, and a 0.7% global comp decline versus consensus at +0.8%. U.S. same-store sales are estimated to fall 2%, with international comps mixed.

“Lousy Q1 trends (-3%ish) are digested with mixed McValue success,” the bank said, but the “Ketchup trade” remains intact. 

Analysts cited encouraging developments, including better QTD trends, “Minecraft, McCrispy strips,” and the rollout of a new premium lemonade. They also noted that sentiment “is starting to improve with promising drivers ahead.”

According to the bank, the franchise-heavy model helps insulate McDonald’s from margin pressures. Wells Fargo models Q1 franchise margins of 83.4%, up 22 basis points year-over-year, and EBIT margin of 44.9%.

Data checks are said to have shown U.S. foot traffic decelerated in Q1, but improved in April. 

“April to-date traffic improved further and running at +5.0% y/y,” analysts wrote, while Bloomberg card spending also rebounded.

Despite macro headwinds and soft Q1 comps, Wells Fargo reiterated its Overweight rating and $350 price target, arguing McDonald’s remains a defensive name with multiple levers for driving growth.

Related articles

McDonald’s named top Q1 earnings idea at Wells Fargo

Kraft Heinz stock rating cut at Bernstein amid continued market share losses

GE Aerospace’s Q1 results come ahead of estimates, annual guide reiterated