Why Is McDonald's (MCD) Down 9.1% Since Last Earnings Report?
It has been about a month since the last earnings report for McDonald's (MCD). Shares have lost about 9.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is McDonald's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
McDonald’s Q1 Earnings Miss, Revenues Top Estimates
McDonald's posted first-quarter 2024 results, wherein earnings missed the Zacks Consensus Estimate but revenues beat the same. The top and bottom lines increased on a year-over-year basis.
Chris Kempczinski, president and CEO of McDonald's, said that as consumers increasingly scrutinize every dollar they spend, the company’s commitment is to consistently earn their patronage by providing top-notch dependable value and exceptional service. Looking ahead to the remainder of 2024 and beyond, MCD’s focus remains on maximizing the competitive strengths outlined in its Accelerating the Arches strategy and expanding its market share in the quick-service restaurant sector to fuel sustained growth.
Earnings & Revenue Discussion
During first-quarter 2024, McDonald's reported adjusted earnings per share (EPS) of $2.70, which missed the Zacks Consensus Estimate of $2.71. However, adjusted earnings increased 2% year over year.
Quarterly net revenues of $6,169 million beat the consensus mark of $6,168 million. The top line rose 5% year over year.
At company-operated restaurants, sales totaled $2.35 billion, up 6% year over year. Sales at franchise-operated restaurants amounted to $3.72 billion and increased 4% year over year. Other revenues rose 6% year over year to $91 million.
Comps Details
In the quarter under discussion, global comps expanded 1.9% compared with 12.6% in the prior-year quarter. The company’s comps increased for the 13th quarter in a row.
Strong Comps Across Segments
U.S.: During the first quarter, segmental comps rose 2.5% compared with 12.6% a year ago. Comparable sales saw a boost due to increased average checks resulting from strategic menu price adjustments. Strong execution at the restaurant level, impactful marketing initiatives highlighting the core menu offerings, and ongoing growth in digital and delivery services played a role in driving strong comparable sales.
International Operated Markets: Segmental comps increased 2.7% compared with 12.6% in the year-ago quarter. Strong comparable sales in Germany and the U.K. resulted in the uptick.
International Developmental Licensed Segment: Segmental comparable sales registered a 0.2% decline against 12.6% growth in the prior-year quarter. Despite positive comparable sales in Japan, Latin America and Europe, the ongoing effects of the Middle East conflict outweighed the gains.
Operating Highlights & Expenses
During the first quarter, McDonald’s total operating costs and expenses were $3.43 billion, up 2% year over year.
Operating income rose 8% year over year to $2.73 billion. Net income totaled $1.92 billion, up 7% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, McDonald's has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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. Notably, McDonald's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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McDonald's Corporation (MCD) : Free Stock Analysis Report
