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McDonald's (MCD -4%) is trading lower today despite reporting another nice EPS beat. However, revenue was a bit light, which means this was MCD's first top line miss since 2Q22. Also, comps were a bit disappointing and some commentary on the call may be weighing on the shares as well.

• Global comp sales came in at +3.4% while US comps were +4.3%. US comps benefited from strong average check growth driven by strategic menu price increases. In fairness, MCD was lapping some tough comps in Q4 of 2022: global comps +12.6% and US comps of +10.3%. However, these results are notably smaller than recent quarters and they were lapping pretty robust comps as well. So there was a drop off in Q4.
• Outside of the US, International Operated Markets (IOM) comps increased +4.4%, driven by strong comps in most markets, led by the UK, Germany and Canada, partly offset by negative comps in France. However, International Developmental Licensed (IDL) comps were a weak spot at just +0.7%. IDL saw positive comps in all geographic regions, with the exception of the Middle East, which was impacted by the war in the region.
• MCD concedes that it is operating in a challenging environment and it expects these headwinds will continue in 2024. Elevated prices and muted consumer confidence is causing consumers to continue to be more discriminating with their dollars. MCD sees lower income consumers as being impacted the most. They are choosing to eat at home, which is more affordable. MCD is not seeing much change among its middle and high income customers. MCD continues to gain share with those groups.
• As such, MCD expects 2024 comp growth will continue to moderate as it returns to a more normalized level of growth with expectations closer to historical averages of between +3-4% in its US and IOM segments. And for IDL, MCD does not expect to see meaningful improvement until there is a resolution in the Middle East. In turn, moderating sales growth and inflation are expected to pressure company-operated margin, which MCD expects will be relatively in line with 2023.

Overall, this was a pretty disappointing way to wrap up 2023 for the Golden Arches. It seems like the days of the huge comp growth we saw in Q1-Q3 is coming to an end. However, that was not entirely surprising. Keep in mind that a good chunk of those comp increases were driven by menu pricing. As inflation has come down, MCD's pricing is coming down broadly in line with inflation. That is partly why MCD is guiding to more normalized +3-4% comps in 2024. We think investors understand that, which helps explain why the stock is not down more. MCD is still the powerhouse in fast food and we think it will remain resilient in 2024. However, this report may lower sentiment on other fast food stocks set to report in the coming weeks.