McDonald's Preview: Likely to Beat - Analyst Blog

By
A A A

We expect fast food giant McDonald's Corp. ( MCD ) to beat expectations when it reports fourth quarter and full year 2012 results on Jan 23 before the opening bell.

Why a Likely Positive Surprise?

Our proven model shows that McDonald's is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate which stands at $1.34 and the Zacks Consensus Estimate that stands at $1.33, is at +0.75%. This is a meaningful and leading indicator of a likely positive earnings surprise for shares.

Zacks #3 Rank (Neutral): McDonald's currently retains a Zacks Rank # 3 (Hold).  

The combination of the stock's Zacks Rank #3 (Hold) and +0.75% ESP makes us confident of a positive earnings beat this announcement.

What is Driving the Better Than Expected Earnings?

After relatively weak performances in the recent past and a monthly decline in Oct, (not seen in a decade), same-store sales (comps) at McDonald's bounced back in Nov 2012.

In fact, the company had to resort to a series of initiatives to counter comps slowdown. Re-emphasis on value menu as well as the return of McRib limited time offering, in mid-December, is expected to drive results this quarter.

Investors should note that McDonald's will likely face easy comparisons across the globe as the year 2013 progresses. Further, one of the company's recent products, "Mighty Wings", currently on a test run, can see a national rollout in the near future. This is expected to provide this Illinois-based fast food operator with a shot in the arm.

Other Stocks to Consider

Other than McDonald's, we also see likely earnings beats coming from three industry peers this earnings season.

AFC Enterprises Inc. ( AFCE ): Earnings ESP of +9.09% and Zacks Rank #1 (Buy).

Bob Evans Farms Inc. ( BOBE ): Earnings ESP of +3.90% and Zacks Rank #1 (Strong Buy).

Chuy's Holdings Inc. ( CHUY ): Earnings ESP of +25.00% and Zacks Rank #2 (Buy).



AFC ENTERPRISES (AFCE): Free Stock Analysis Report

BOB EVANS FARMS (BOBE): Free Stock Analysis Report

CHUYS HOLDINGS (CHUY): Free Stock Analysis Report

MCDONALDS CORP (MCD): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AFCE , BOBE , CHUY , MCD

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

Most Active by Volume

67,310,517
  • $100.53 ▲ 1.38%
50,893,843
  • $8.02 ▲ 2.56%
48,783,882
  • $10.25 ▲ 3.85%
43,859,280
  • $5.39 ▼ 4.09%
41,392,452
    $15.45 unch
31,440,620
  • $8.09 ▲ 3.45%
30,705,588
  • $3.11 ▲ 0.97%
28,829,509
  • $3.87 ▲ 19.44%
As of 8/19/2014, 04:03 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com