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McDonald's (MCD) Stock Up on Q3 Earnings and Revenue Beat


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McDonald's Corporation MCD reported impressive third-quarter 2018 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings per share of $2.10 surpassed the consensus mark of $1.98 by 6.1% and increased 19% from the year-ago quarter (22% in constant currencies). The upside reflects stronger operating performance.

Meanwhile, foreign currency translation had a negative impact of 5 cents per share on earnings in the quarter. Following the quarterly results, the company's shares increased nearly 3% during the pre-market trading session. Moreover, the stock has gained 7.3% in the past six months compared with industry 's 5.9% growth.

Revenues Decline but Global Comps Improve

In the quarter under review, revenues of $5,369.4 million outpaced the consensus mark of $5,247 million but decreased 7% year over year. This downturn reflects the impact of the company's strategic refranchising initiatives. On a constant-currency basis, the metric declined 5% on a year-over-year basis.

At company-operated restaurants, revenues decreased 18% year over year to $2,511 million. However, the same at franchise-operated restaurants improved 6% to $2,858.4 million.

Global comps grew 4.2% driven by positive comparable sales across all segments. Notably, this marked the thirteenth consecutive quarter of positive comparable sales. In the second quarter of 2018, comps were up 4%.

McDonald's Corporation Price, Consensus and EPS Surprise

McDonald's Corporation Price, Consensus and EPS Surprise | McDonald's Corporation Quote

Solid Comps Across Segments

U.S.: Comps grew 2.4% in the third 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 2.6%.

Segment operating income rose 3% owing to increase in franchised margin dollars and G&A savings.

International Lead Markets: Comps at this segment grew 5.4% year over year, higher than a 4.9% rise witnessed in the last reported quarter. Robust sales in the United Kingdom, Australia and France drove comps.

Operating income was flat year over year, including the impact of foreign currency translation. At constant currency, the figure increased 3% primarily on the back of sales-driven improvements in franchised margin dollars.

High-Growth Markets: Comps at this segment were up 4.6%, higher than the prior-quarter's increase of 2.4%. The uptick can be attributed to strong performance in Italy and the Netherlands as well as positive results across majority of the segments. Operating income, excluding the gain from sale of the Company's businesses in China and Hong Kong, declined 5% including the impact of foreign currency translation. At constant currency, the metric declined 1%.

Foundational Markets: Comps at this segment grew 6% on the back of positive sales performance across all geographic regions. However, the figure was lower than 6.8% growth reported in the last reported quarter.

Zacks Rank & Key Picks

McDonald's carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Dave & Buster's Entertainment, Inc. PLAY , BJ's Restaurants, Inc. BJRI and Darden Restaurants, Inc. DRI , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Dave & Buster's Entertainment has an impressive long-term earnings growth rate of 14.8%.

BJ's Restaurants has reported better-than-expected earnings in the trailing three quarters.

Darden Restaurants earnings have surpassed the consensus mark in the trailing four quarters, with an average of 5.1%.

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



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: MCD , BJRI , DRI , PLAY



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