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McDonald's (MCD) Up 8.7% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for McDonald's (MCD - Free Report) . Shares have added about 8.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is McDonald's due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
McDonald's Q2 Earnings and Revenues Lag Estimates
McDonald's reported second-quarter 2024 results, with earnings and revenues missing the Zacks Consensus Estimate. The top and bottom lines decreased on a year-over-year basis.
Earnings & Revenue Discussion
In second-quarter 2024, McDonald's reported adjusted earnings per share (EPS) of $2.97, missing the Zacks Consensus Estimate of $3.08. Moreover, adjusted earnings decreased 6% year over year.
Quarterly net revenues of $6,490 million lagged the consensus mark of $6,651 million. The top line declined 0.1% year over year.
At company-operated restaurants, sales were $2.46 billion, down 1% year over year. Sales at franchise-operated restaurants amounted to $3.94 billion, which increased 0.2% year over year. Other revenues rose 16% year over year to $89 million.
Comps Details
In the quarter under discussion, global comps declined 1% against 11.7% growth in the prior-year quarter. The company’s comps decreased for the first time after increasing in thirteen straight quarters.
Comps Across Segments
United States.: In the second quarter, segmental comps dropped 0.7% against 10.3% growth of the prior year. Comparable sales were influenced by a decline in guest counts, though this was somewhat balanced by higher average checks thanks to strategic menu price increases. Effective execution at the restaurant level, along with ongoing growth in digital orders and delivery services, also contributed positively to the overall results.
International Operated Markets: Segmental comps decreased 1.1% against 11.9% growth in the year-ago quarter. The performance of the segment was affected by declining comparable sales in several markets, with France being a significant contributor to this downturn.
International Developmental Licensed Segment: Segmental comparable sales registered a 1.3% decline against 14% growth in the prior-year quarter. The ongoing conflict in the Middle East and declining comparable sales in China outweighed the positive sales performance in Latin America and Japan.
Operating Highlights & Expenses
In the second quarter, McDonald’s total operating costs and expenses were $3.57 billion, up 5% year over year.
Operating income dropped 6% year over year to $2.92 billion. Net income totaled $2.02 billion, down 12% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, McDonald's has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise McDonald's has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
McDonald's is part of the Zacks Retail - Restaurants industry. Over the past month, Chipotle Mexican Grill (CMG - Free Report) , a stock from the same industry, has gained 6.8%. The company reported its results for the quarter ended June 2024 more than a month ago.
Chipotle reported revenues of $2.97 billion in the last reported quarter, representing a year-over-year change of +18.2%. EPS of $0.34 for the same period compares with $0.25 a year ago.
For the current quarter, Chipotle is expected to post earnings of $0.24 per share, indicating a change of +4.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.6% over the last 30 days.
Chipotle has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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McDonald's (MCD) Up 8.7% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for McDonald's (MCD - Free Report) . Shares have added about 8.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is McDonald's due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
McDonald's Q2 Earnings and Revenues Lag Estimates
McDonald's reported second-quarter 2024 results, with earnings and revenues missing the Zacks Consensus Estimate. The top and bottom lines decreased on a year-over-year basis.
Earnings & Revenue Discussion
In second-quarter 2024, McDonald's reported adjusted earnings per share (EPS) of $2.97, missing the Zacks Consensus Estimate of $3.08. Moreover, adjusted earnings decreased 6% year over year.
Quarterly net revenues of $6,490 million lagged the consensus mark of $6,651 million. The top line declined 0.1% year over year.
At company-operated restaurants, sales were $2.46 billion, down 1% year over year. Sales at franchise-operated restaurants amounted to $3.94 billion, which increased 0.2% year over year. Other revenues rose 16% year over year to $89 million.
Comps Details
In the quarter under discussion, global comps declined 1% against 11.7% growth in the prior-year quarter. The company’s comps decreased for the first time after increasing in thirteen straight quarters.
Comps Across Segments
United States.: In the second quarter, segmental comps dropped 0.7% against 10.3% growth of the prior year. Comparable sales were influenced by a decline in guest counts, though this was somewhat balanced by higher average checks thanks to strategic menu price increases. Effective execution at the restaurant level, along with ongoing growth in digital orders and delivery services, also contributed positively to the overall results.
International Operated Markets: Segmental comps decreased 1.1% against 11.9% growth in the year-ago quarter. The performance of the segment was affected by declining comparable sales in several markets, with France being a significant contributor to this downturn.
International Developmental Licensed Segment: Segmental comparable sales registered a 1.3% decline against 14% growth in the prior-year quarter. The ongoing conflict in the Middle East and declining comparable sales in China outweighed the positive sales performance in Latin America and Japan.
Operating Highlights & Expenses
In the second quarter, McDonald’s total operating costs and expenses were $3.57 billion, up 5% year over year.
Operating income dropped 6% year over year to $2.92 billion. Net income totaled $2.02 billion, down 12% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, McDonald's has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise McDonald's has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
McDonald's is part of the Zacks Retail - Restaurants industry. Over the past month, Chipotle Mexican Grill (CMG - Free Report) , a stock from the same industry, has gained 6.8%. The company reported its results for the quarter ended June 2024 more than a month ago.
Chipotle reported revenues of $2.97 billion in the last reported quarter, representing a year-over-year change of +18.2%. EPS of $0.34 for the same period compares with $0.25 a year ago.
For the current quarter, Chipotle is expected to post earnings of $0.24 per share, indicating a change of +4.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.6% over the last 30 days.
Chipotle has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.