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McDonald's (MCD) Q2 Earnings Miss, Revenues Beat Estimates

McDonald's Corporation MCD reported mixed second-quarter 2019 results, wherein earnings missed the Zacks Consensus Estimate but revenues beat the same. Following the quarterly results, shares of the company gained 2.6% during the pre-market trading session.

Adjusted earnings came in at $2.05 per share, which missed the consensus mark by a penny. However, the metric witnessed a gain of 3% from the prior-year quarter number. Meanwhile, foreign currency translation had a negative impact of 7 cents per share on earnings in the quarter under review.

Revenues Decline But Global Comps Improve

In the second quarter, revenues of $5,341.3 million outpaced the Zacks Consensus Estimate of $5,335 million but decreased 0.2% year over year. This downturn reflects the impact of the company’s strategic refranchising initiatives. However, on a constant-currency basis, the metric increased 3% on a year-over-year basis.

At company-operated restaurants, revenues decreased 7% year over year to $2,400.4 million. However, the same at franchise-operated restaurants improved 7% to $2,940.9 million.

Global comps grew 6.5% driven by positive comparable sales across all segments. Notably, this marked the sixteenth consecutive quarter of positive comparable sales. In the first quarter of 2019, comps were up 4.5%.

McDonald's Corporation Price, Consensus and EPS Surprise

McDonald's Corporation Price, Consensus and EPS Surprise

McDonald's Corporation price-consensus-eps-surprise-chart | McDonald's Corporation Quote

Solid Comps Across Segments

U.S.: Comps at this segment grew 5.7% in the second quarter, higher than a 4.5% rise in the prior quarter. This uptick was driven by successful national and local deal offerings, which includes the 2 for $5 Mix as well as Match deal. Deployment of Experience of the Future and strength in our core menu items also drove the segment’s comps.

Segment operating income rose 5% due to the inclusion of strategic restructuring charges in the year-ago quarter. Excluding the charges, operating income declined 3% due to lesser gains on sales of restaurant businesses.

International Lead Markets: Comps at this segment rose 6.6% year over year, higher than a 6% rise registered in the last reported quarter. Robust sales in the U.K., France, Germany and positive results across all markets drove comps.

Operating income increased 3% year over year, including the impact of foreign currency translation. At constant currency, the figure increased 8%. This upside can be attributed to McDonald's sales-driven improvements in franchised margin dollars.

International Developmental Licensed Segment: The segment’s comparable sales increased 7.9% during the second quarter owing to robust sales performance across all geographic regions. In the preceding quarter, the segment’s comps rose 6%.

Other Information

McDonald's returned $2 billion to its shareholders via stock repurchase and dividends. In 2019, the company expects to return nearly $9 billion to its shareholders.

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 fourth-quarter fiscal 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same. Adjusted earnings of $1.76 per share beat the Zacks Consensus Estimate of $1.73. The bottom line also increased 26.6% year over year on higher revenues.

Domino’s DPZ reported mixed second-quarter 2019 financial numbers, wherein earnings exceeded the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings of $2.19 per share outpaced the Zacks Consensus Estimate of $2.00. The metric also increased 19% on a year-over-year basis. The bottom-line improvement was driven by higher net income and lower diluted share count as a result of share repurchases.

Chipotle CMG reported better-than-expected results in the second quarter of 2019. Its adjusted earnings of $3.99 per share surpassed the Zacks Consensus Estimate of $3.69 by 8.1%. The bottom line also grew 39% from the year-ago quarter backed by solid revenues and strong operating margins.

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