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Fast food stocks could feel the heat near term, but analysts say they should be a stable area for investors longer term.
Both Wendy's and McDonald's shares slumped Tuesday, as investors reacted to Wendy's earnings and McDonald's April sales report.
“Fundamentals [on these fast-food chains] have been great,” said Larry Miller of RBC Capital. “But over the next six months, you have to look at the economy and how it will affect these names…there’s been a lot of noise.”
Stock performance on the fast-food giants have been mixed year-to-date. McDonald’s has declined 7.5 percent, while Yum Brands has surged nearly 30 percent. And Wendy’s has slumped almost 13 percent.
Miller explained that Yum's outperformance over McDonald's is primarily due to the company's large exposure to China and other Asian markets. Meanwhile, McDonald's is closely tied to the U.S. and European countries.
“McDonald’s will see a tough year no matter what,” explained Miller. “They’re up against tough comparisons, unfavorable foreign exchange and their restaurants are largely in the U.S. and European countries.”
Still, at current levels, Miller said McDonald’s is a better buy for investors over smaller rival Wendy’s.
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