We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
McDonald's (MCD) Q1 Earnings Lag Estimates, Comps Decline
Read MoreHide Full Article
McDonald's Corporation (MCD - Free Report) reported first-quarter 2020 results, wherein earnings missed the Zacks Consensus Estimate but revenues beat the same. However, both top and bottom lines declined year over year. Results in the quarter were impacted by the coronavirus pandemic, which compelled the company to close stores. Limited operations and change in consumer behavior also hurt the company’s performance. Following the results, the company’s shares are down 1% in pre-market trading session.
Adjusted earnings came in at $1.47 per share, which missed the Zacks Consensus Estimate of $1.59. However, the bottom line also declined 15% year over year. Meanwhile, foreign currency translation had a negative impact of 2 cents per share on earnings in the quarter under review.
Revenues & Comps Discussion
In the first quarter, revenues of $4,714.4 million beat the Zacks Consensus Estimate of $4,696 million. However, the figure declined 6% year over year. This downtrend can primarily be attributed to the coronavirus pandemic. Moreover, on a constant-currency basis, the top line decreased 5% on a year-over-year basis.
At company-operated restaurants, revenues came in at $2,025.8 million, down 10% year over year. Franchise-operated restaurants declined 4% to $2,608 million.
In first two months of the quarter under review, global comparable sales increased 7.2%. In the second-half of March global comps declined sharply due the pandemic. The company ended the quarter with comps decline of 3.4% against a gain of 5.4% in the prior-year quarter. Notably, comps declined in the first quarter after reporting positive comps in the preceding 19 quarters. In fourth-quarter 2019, comps were also up 5.9%.
McDonald's Corporation Price, Consensus and EPS Surprise
U.S.: Comps at this segment grew 0.1% in the first quarter, against a rise of 4.5% in the prior-year quarter. Deployment of Experience of the Future, strength in core menu items and successful national and local deal offerings drove the segment’s comps.
International Operated Markets: Comps at this segment declined 6.9% year over year, against a gain of 6% in the year-ago quarter.
International Developmental Licensed Segment: The segment’s comparable sales decreased 4.3% in the first quarter. In the prior-year quarter, the segment’s comps had improved 6%.
Other Information
In an effort on preserve financial flexibility to tide over the current situation, the company has suspended the share repurchase program. It has enhanced cash position with $6.5 billion of new debt financing. The company has also reduced capital expenditures by $1 billion for 2020.
Coronavirus Update
All restaurants in the United States are operating through drive-thru, delivery & take-away only. However, the company has been operating in limited capacity in Australia, Canada, Germany and Russia. In fact, some of the restaurants in these markets have been closed. Almost all the restaurants in France, Italy, Spain and the U.K. have been temporarily closed. Although 99% restaurants are open in China, demand remains low. In Brazil, 65% of its restaurants are open but majority have limited operations.
Zacks Rank & Key Picks
McDonald's, which shares space with Yum! Brands, Inc. (YUM - Free Report) , Domino's Pizza, Inc. (DPZ - Free Report) and Yum China Holdings, Inc. (YUMC - Free Report) , has a Zacks Rank #4 (Sell).
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
Image: Bigstock
McDonald's (MCD) Q1 Earnings Lag Estimates, Comps Decline
McDonald's Corporation (MCD - Free Report) reported first-quarter 2020 results, wherein earnings missed the Zacks Consensus Estimate but revenues beat the same. However, both top and bottom lines declined year over year. Results in the quarter were impacted by the coronavirus pandemic, which compelled the company to close stores. Limited operations and change in consumer behavior also hurt the company’s performance. Following the results, the company’s shares are down 1% in pre-market trading session.
Adjusted earnings came in at $1.47 per share, which missed the Zacks Consensus Estimate of $1.59. However, the bottom line also declined 15% year over year. Meanwhile, foreign currency translation had a negative impact of 2 cents per share on earnings in the quarter under review.
Revenues & Comps Discussion
In the first quarter, revenues of $4,714.4 million beat the Zacks Consensus Estimate of $4,696 million. However, the figure declined 6% year over year. This downtrend can primarily be attributed to the coronavirus pandemic. Moreover, on a constant-currency basis, the top line decreased 5% on a year-over-year basis.
At company-operated restaurants, revenues came in at $2,025.8 million, down 10% year over year. Franchise-operated restaurants declined 4% to $2,608 million.
In first two months of the quarter under review, global comparable sales increased 7.2%. In the second-half of March global comps declined sharply due the pandemic. The company ended the quarter with comps decline of 3.4% against a gain of 5.4% in the prior-year quarter. Notably, comps declined in the first quarter after reporting positive comps in the preceding 19 quarters. In fourth-quarter 2019, comps were also up 5.9%.
McDonald's Corporation Price, Consensus and EPS Surprise
McDonald's Corporation price-consensus-eps-surprise-chart | McDonald's Corporation Quote
Solid Comps Across Segments
U.S.: Comps at this segment grew 0.1% in the first quarter, against a rise of 4.5% in the prior-year quarter. Deployment of Experience of the Future, strength in core menu items and successful national and local deal offerings drove the segment’s comps.
International Operated Markets: Comps at this segment declined 6.9% year over year, against a gain of 6% in the year-ago quarter.
International Developmental Licensed Segment: The segment’s comparable sales decreased 4.3% in the first quarter. In the prior-year quarter, the segment’s comps had improved 6%.
Other Information
In an effort on preserve financial flexibility to tide over the current situation, the company has suspended the share repurchase program. It has enhanced cash position with $6.5 billion of new debt financing. The company has also reduced capital expenditures by $1 billion for 2020.
Coronavirus Update
All restaurants in the United States are operating through drive-thru, delivery & take-away only. However, the company has been operating in limited capacity in Australia, Canada, Germany and Russia. In fact, some of the restaurants in these markets have been closed. Almost all the restaurants in France, Italy, Spain and the U.K. have been temporarily closed. Although 99% restaurants are open in China, demand remains low. In Brazil, 65% of its restaurants are open but majority have limited operations.
Zacks Rank & Key Picks
McDonald's, which shares space with Yum! Brands, Inc. (YUM - Free Report) , Domino's Pizza, Inc. (DPZ - Free Report) and Yum China Holdings, Inc. (YUMC - Free Report) , has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>