) is slated to release its fourth-quarter and fiscal 2011 results
on January 24, before the opening bell. The current Zacks Consensus
Estimate for the fourth quarter is $1.29 per share on revenue of
$6.82 billion. For 2011, the Zacks Consensus Estimates of
earnings and revenue are $5.23 and $27.0 billion, respectively.
The current Zacks Consensus Estimates for the fourth quarter and
fiscal 2011 reflect a year-over-year growth of 12.17% and 14.01%,
With respect to earnings surprises, over the trailing four
quarters, McDonald's has outperformed the Zacks Consensus Estimate
in three out of four quarters in the range of negative 0.86% to
1.40%. The average earnings surprise was positive 1.72%. This
implies that the company has beaten the Zacks Consensus Estimate by
the same magnitude over the last four quarters.
Third Quarter Recap
Oak Brook, Illinois-based McDonald's posted third-quarter 2011
earnings of $1.45 per share, beating the Zacks Consensus Estimate
of $1.43. Reported earnings increased 12% from $1.29 per share in
the prior-year quarter.
McDonald's reported revenues of $7.17 billion, up 14% year over
year, exceeding the Zacks Consensus Estimate of $7.03 billion.
Excluding the positive impact of foreign currency translation,
revenues grew 8.0% year over year.
Earnings Estimate Revisions - Overview
Ahead of the earnings release, we have noticed a positive
sentiment prevailing around the stock.
Agreement of Estimate Revisions
In the last 7 days, one out of 21 analysts covering the stock
increased the estimate for the fourth quarter. Of the 24 analysts,
one analyst raised the estimates for fiscal 2011 and 2012 while
none moved in the opposite direction.
Magnitude of Estimate Revisions
There has been no change in the estimates in the last 30 days.
Therefore, the analysts expect the company to report in line.
We reiterate our long-term Neutral rating on McDonald's. A
strong balance sheet, consistent growth in revenue as well as
earnings, solid product line-up and an exposure to faster-growing
international markets give the company an edge over its peers.
Management expects to start the year 2012 with 3% pricing and is
likely to take additional increases during 2012, which will boost
its bottom line. We do not expect any adverse effect inconsumer
behavior following this incrementgiven the brand's huge acceptance
The best part is that, despite the implementation of austerity
measures, no signs of slowdown have been witnessed in Europe till
now. Moreover, we expect the company to report strong sales in the
month of December as severe winter hurt sales in the U.K. and
Germany as well as in the U.S. in the same month last year.
However, for the fourth quarter, McDonald's will likely
experience minimal benefit from foreign currency translation while
on a positive note, inflationary pressure will ease out. Coming to
2012, lesser commodity inflation in Europe stemmed from favorable
chicken and dairy costs will be mitigated by higher selling,
general & administrative expenses (up 7%). Besides, heightened
commodity costs environment will be intact in the U.S.
McDonald's currently retains a Zacks #2 Rank (short-term Buy
rating). One of McDonald's primary competitors,
Yum! Brands Inc.
), will announce its fourth-quarter 2011 results on February 1.
MCDONALDS CORP (
): Free Stock Analysis Report
YUM! BRANDS INC (
): Free Stock Analysis Report
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