Markets

McDonald's (MCD) Q2 Earnings Miss Estimates, Comps Down

McDonald's Corporation MCD reported mixed second-quarter 2020 results, wherein the bottom line missed the Zacks Consensus Estimate but the top line beat the same. However, both earnings and revenues declined year over year. Results in the quarter were impacted by the coronavirus pandemic. Limited operations and change in consumer behavior also hurt the company’s performance. Following the results, the company’s shares are down 2% in pre-market trading session.

However, robust drive-thru presence and its investments in delivery and digital over the past few years have aided the company during the current scenario. The company witnessed continued improvement in results throughout the second quarter. As of Jun 30, 2020, most of the company’s restaurants are open globally.

The company reported adjusted earnings of 66 cents per share, which missed the consensus of 76 cents. Moreover, the bottom line declined 68% year over year. Meanwhile, foreign currency translation had a negative impact of 1 cent per share on earnings in the quarter under review.

Revenues & Comps Discussion

In the second quarter, revenues of $3,761.5 million beat the Zacks Consensus Estimate of $3,698 million. However, the figure declined 30% year over year. This downtrend can primarily be attributed to the coronavirus pandemic. Moreover, on a constant-currency basis, the top line decreased 29% on a year-over-year basis.

At company-operated restaurants, revenues came in at $1,593.7 million, down 34% year over year. Moreover, the same at franchise-operated restaurants slumped 29% to $2,088 million.

In the quarter global comps declined 23.9%, against a gain of 6.5% in the prior-year quarter. Comps declined for the second straight quarter after reporting positive comps in the trailing 19 quarters. In first-quarter 2020, comps were down 3.4%.

McDonalds Corporation Price, Consensus and EPS Surprise McDonalds Corporation Price, Consensus and EPS Surprise

McDonalds Corporation price-consensus-eps-surprise-chart | McDonalds Corporation Quote

Solid Comps Across Segments

U.S.: Comps at this segment declined 8.7% in the second quarter, against a gain of 5.7% rise in the prior-year quarter. However, the company witnessed sequentially improvement in comps throughout the quarter. At the end of April, May and June comps were down 19.2%, 5.1% and 2.3%, respectively.

International Operated Markets: Comps at this segment declined 41.4% year over year, against a gain of 6.6% in the year-ago quarter. Comps were hurt by temporary restaurant closures and limited operations, particularly in the U.K. and France. However, the company witnessed positive comps in Australia in May and June driven by drive-thru performance.

International Developmental Licensed Segment: The segment’s comparable sales decreased 24.2% in the second quarter. In the prior-year quarter, the segment’s comps had risen 6.5%. Comps were negatively impacted by temporary restaurant closures across nearly all geographies, primarily in Latin America.

Zacks Rank & Key Picks

McDonald's, which shares space with Yum! Brands, Inc. YUM, carries a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the same space include Domino's Pizza, Inc. DPZ and Yum China Holdings, Inc. YUMC. Both the stocks carry the Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Domino's Pizza and Yum China have an impressive long-term earnings growth rate of 13.9% and 9.5%, respectively.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>


Click to get this free report

Dominos Pizza Inc (DPZ): Free Stock Analysis Report

McDonalds Corporation (MCD): Free Stock Analysis Report

Yum Brands, Inc. (YUM): Free Stock Analysis Report

Yum China Holdings Inc. (YUMC): Free Stock Analysis Report

To read this article on Zacks.com click here.

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

Other Topics

Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More