McDonald's (MCD) Q2 Earnings Beat Estimates, Revenues Lag
McDonald's Corporation MCD reported mixed second-quarter 2022 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top line fell year over year, while the bottom line increased on a year-over-year basis. MCD’s performance during the quarter was affected by restaurant closures in Russia and Ukraine coupled with inflationary pressures on labor and commodities.
Earnings & Revenue Discussion
During second-quarter 2022, McDonald's reported adjusted earnings per share (EPS) of $2.55, surpassing the Zacks Consensus Estimate of $2.45 by 4.1%. In the prior-year quarter, MCD had reported an adjusted EPS of $2.37.
Quarterly net revenues of $5,718.4 million missed the consensus mark of $5,860 million by 2.4%. The top line dipped 3% year over year.
McDonald's Corporation Price, Consensus and EPS Surprise
McDonald's Corporation price-consensus-eps-surprise-chart | McDonald's Corporation Quote
At company-operated restaurants, sales were $2,112.8 million, down 15% year over year. The same at franchise-operated restaurants was $3,526.8 million, up 7% year over year.
Comps Details
For the quarter under discussion, global comps advanced 9.7%, while a gain of 40.5% was reported in the prior-year quarter. This marks the sixth consecutive quarter of comps growth.
Strong Comps Across Segments
U.S.: During the second quarter, comps at this segment rose 3.7%, while a gain of 25.9% was reported in the prior-year period. McDonald’s’ comps for the quarter benefited from a menu price increase, robust digitalization and value offerings across its everyday menu.
International Operated Markets: Comps at this segment increased 13% year over year compared with a gain of 75.1% reported in the year-ago quarter. MCD gained from strong comparable sales in France and Germany.
International Developmental Licensed Segment: During the quarter, the segment’s comparable sales increased 16% year over year. In the prior-year quarter, its comps increased 32.3%. McDonald's gained from robust performance in Japan and Brazil. However, this was partially offset by negative comps in China due to COVID-19 resurgences and related government restrictions.
Operating Highlights & Expenses
During the second quarter, McDonald’s total operating costs and expenses came in at $4,006.6 million, up 25% from the prior-year quarter’s levels.
During the quarter, operating income decreased 36% year over year to $1,711.8 million.
Net income during the quarter totaled $1,188 million, down 46% from $2,219.3 million reported in the year-ago quarter.
Zacks Rank & Key Picks
McDonald's currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Retail-Wholesale sector are Dollar Tree Inc. DLTR, Designer Brands Inc. DBI and Potbelly Corporation PBPB.
Dollar Tree sports a Zacks Rank #1, currently. DLTR has a trailing four-quarter earnings surprise of 13.1%, on average. The stock has gained 67.4% in the past year.
The Zacks Consensus Estimate for Dollar Tree’s 2022 sales and EPS suggests growth of 6.7% and 40.5%, respectively, from the corresponding year-ago period’s levels.
Designer Brands flaunts a Zacks Rank of 1 at present. DBI has a trailing four-quarter earnings surprise of 102.5%, on average. Shares of DBI have increased 2.5% in the past year.
The Zacks Consensus Estimate for Designer Brands’ 2023 sales and EPS suggests growth of 6.9% and 16.5%, respectively, from the comparable year-ago period’s levels.
Potbelly is currently Zacks #1 Ranked. PBPB has a trailing four-quarter earnings surprise of 26.2%, on average. Shares of PBPB have declined 21.2% in the past year.
The Zacks Consensus Estimate for Potbelly’s 2022 sales and EPS suggests growth of 14.6% and 94.2%, respectively, from the corresponding year-ago period’s levels.
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