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McDonald's (MCD) Q4 Earnings Beat Estimates, Revenues Lag

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McDonald's Corporation (MCD - Free Report) reported mixed fourth-quarter 2023 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top and the bottom line increased on a year-over-year basis.

Chris Kempczinski, president and CEO of McDonald's, attributed the performance to the effective implementation of the Accelerating the Arches strategy. The initiative paved a path for a cumulative comparable sales growth of over 30% from 2019 levels. The management stated optimism in the company’s resiliency in the face of predicted macroeconomic challenges in 2024.

Earnings & Revenue Discussion

During fourth-quarter 2023, McDonald's reported adjusted earnings per share (EPS) of $2.95, outpacing the Zacks Consensus Estimate of $2.81.  Adjusted earnings increased 11% from the prior-year quarter’s figure.

McDonald's Corporation Price, Consensus and EPS Surprise

 

McDonald's Corporation Price, Consensus and EPS Surprise

McDonald's Corporation price-consensus-eps-surprise-chart | McDonald's Corporation Quote

 

Quarterly net revenues of $6.4 billion missed the consensus mark of $6.5 billion. The top line rose 8% year over year.

At company-operated restaurants, sales were $2.5 billion, up 12% year over year. Sales at franchise-operated restaurants amounted to $3.9 billion and increased 6% year over year. Other revenues fell 13% year over year to $63.5 million. Our model predicted sales by company-operated and franchise-operated restaurants to rise 18% and 4.1% year over year, respectively.

Comps Details

In the quarter under discussion, global comps expanded by 3.4% compared with 12.6% in the prior-year quarter. Our estimate was 3.3%.

Strong Comps Across Segments

U.S.: During the fourth quarter, segmental comps rose 4.3% year over year compared with 10.3% a year ago. Comps benefited from a menu price increase, effective marketing campaigns and continued digital and delivery growth. Our model estimated U.S. comps to climb 3.8%.

International Operated Markets: Segmental comps extended 4.4% year over year compared with 12.6% in the year-ago quarter. Strong comparable sales in Canada, Germany and the U.K. resulted in the uptick. We anticipated a 3.3% year-over-year rise.

International Developmental Licensed Segment: Segmental comparable sales registered a 0.7% gain year over year compared with 16.5% in the prior-year quarter. McDonald's benefited from robust comps in all geographic locations (excluding the Middle East). Our model anticipated the metric to inch up 1.8% year over year.

Operating Highlights & Expenses

During the fourth quarter, McDonald’s total operating costs and expenses were $3.6 billion, up 8% year over year.

Operating income rose 8% year over year to $2.8 billion. Net income totaled $2 billion, up 7% year over year.

Balance Sheet

As of Dec 31, 2023, cash and equivalents came in at $4.6 billion compared with $2.6 billion as of Dec 31, 2022.

Long-term debt as of Dec 31, 2023, was $37.2 billion compared with $35.9 billion as of Dec 31, 2022.

2023 Highlights

Total revenues in 2023 amounted to $25.5 billion compared with $23.2 billion in 2022.

Net Income in 2023 came in at $8.5 billion compared with $6.2 billion reported in 2022.

In 2023, diluted EPS came in at $11.94 compared with $10.10 reported in the previous year.

Zacks Rank & Key Picks

MCD currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Retail – Restaurants industry include:

Carrols Restaurant Group, Inc. sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 102% on average. Shares of TAST have rallied 363.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for TAST’s 2024 sales and EPS indicates 3.8% and 25.5% growth, respectively, from the year-ago period’s levels.

Darden Restaurants, Inc. (DRI - Free Report) carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 4.2%, on average. Shares of DRI have increased 11.2% in the past year.

The Zacks Consensus Estimate for DRI’s 2024 sales and EPS indicates 9.9% and 10.9% growth, respectively, from the year-ago period’s levels.

Chipotle Mexican Grill, Inc. (CMG - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 5.8%, on average. The stock has gained 45.9% in the past year.

The Zacks Consensus Estimate for CMG’s 2024 sales and EPS suggests rises of 13.3% and 19.6%, respectively, from the year-ago period’s levels.


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