The company reported on Friday that July same-store sales in its Asia Pacific, Middle East and African markets fell 7.3%. Wall Street was looking for a decline of 0.2%. The region accounts for about 10% of McDonald's global sales.
The company also reported that same-store sales in the U.S. declined 3.2% during the month. Unless these figures rebound dramatically, McDonald's will likely post a drop in revenue this year for the first time in more than a decade.
The stock was trading Monday morning at $93.66, down about 10% from its all-time high of $103.78, which was set in March. The shares have lost 3.4% year to date, compared with a 5% gain for the Standard & Poor's 500 Index.
At current levels, the stock is a bargain. It trades at about 17 times last year's earnings, compared with the S&P's price-to-earnings ratio of 19.2. Plus, McDonald's is expected to return $5 billion to shareholders this year through stock buybacks and dividends. With the stock's dividend yield of 3.2%, there is minimal risk to owning the shares.
McDonald's problems in Asia stem from reports that a supplier allegedly relabeled expired meat in China. McDonald's could not be reached for comment.
Smart investors aren't worried, however. McDonald's isn't going anywhere. The company has responded to the food scare by limiting menu items to mitigate the threat and ensure that its food is safe to eat.