McDonald’s (MCD) Q1 Earnings Top, Comps Continue to Impress
McDonald’s Corporation MCD reported first-quarter 2018 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings per share of $1.79 outpaced the consensus mark of $1.67 by 7.2% and improved 22% from the year-ago quarter (16% in constant currencies). The upside reflects stronger operating performance.
Meanwhile, foreign currency translation had a positive impact of 8 cents per share on earnings in the quarter. Notably, adjusted earnings exclude the impact of a net tax cost associated with the Tax Cuts and Jobs Act of 2017.
Following the quarterly results, shares of the company increased 4% in pre-market trading session. However, in the past three months, the stock has declined 7.5% compared with industry’s decrease of 1.6%.
Revenues Decline But Global Comps Improve
Revenues of $ 5,138.9 million outpaced the consensus mark of $4,915 million by 4.5% but declined 9% year over year. The downturn reflects the impact of the company’s strategic refranchising initiative.
Revenues at company-operated restaurants were down 26% year over year to $2,535.6 million. However, the same at franchise-operated restaurants increased 15% to $2,603.3 million.
Global comps grew 5.5% supported by encouraging guest count across segments. This marked the eleventh consecutive quarter of positive comparable sales. Meanwhile, comps rise was similar to growth in the fourth-quarter 2017.
Solid Comps Across Segments
U.S.: Comps grew 2.9% in the first quarter owing to increase in average check resulting from rise in menu price as well as product mix shift. Comps growth, however, was lower than the prior-quarter rise of 4.5%.
Segment operating income increased 5% backed by higher sales-driven franchised margin dollars and increase in sales from restaurant businesses, partially offset by lower company-operated margin dollars.
International Lead Markets: Comps at this segment grew 7.8% year over year, higher than a 6% rise witnessed in the last reported quarter. Robust sales in the United Kingdom and Germany along with upbeat results across all other markets drove comps.
Operating income was up 21%, including the impact of foreign currency translation. At constant currency, the figure was up 9% primarily on the back of sales-driven improvements in franchised margin dollars.
High-Growth Markets: Comps grew 4.7%, which was higher than the prior-quarter’s increase of 4%. The uptick can be attributed to strong performance in China and Italy as well as positive results across majority of the segments, partially offset by continual challenges in South Korea.
Foundational Markets: Comps in Foundational Markets grew 8.7% on the back of positive sales performance across all geographic regions. Moreover, the figure came in higher than 8% growth in the last reported quarter.
Zacks Rank & Peer Releases
McDonald’s carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Darden DRI reported mixed third-quarter fiscal 2018 results, wherein earnings surpassed the Zacks Consensus Estimate while revenues lagged the same. Adjusted earnings of $1.71 per share increased 29.5% year over year on the back of higher revenues.
Restaurant Brands’ QSR first-quarter 2018 earnings and revenues surpassed the Zacks Consensus Estimate. Earnings under the previous accounting standard came in at 67 cents, improving 86.1% year over year.
Chipotle’s CMG first-quarter 2018 earnings surpassed analysts’ expectations while revenues were in line with the same. Adjusted earnings of $2.13 grew 33.1% from the year-ago quarter, driven by higher revenues and lower food costs.
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