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McDonald's (MCD) Q2 Earnings: Disappointment in Store?
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McDonald's Corp. (MCD - Free Report) is scheduled to report second-quarter 2016 results on Jul 26, before the opening bell.
Last quarter, McDonald's posted a 6.03% positive earnings surprise. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 5.70%.
Let’s see how things are shaping up for this announcement.
Though McDonald’s posted positive comps over the past three quarters, the guest count remained sluggish. We expect traffic trends to continue to be weak in certain major international markets in the second quarter as well.
Importantly, a slowdown in the Chinese economy is hurting sales in the region, which accounts for a large chunk of McDonald’s revenues thereby hampering the overall top-line performance. We expect the weak sales trends to continue in the second quarter. Meanwhile, macroeconomic uncertainties and decreasing consumer purchasing power in Russia coupled with challenging economic/political conditions in Europe may further impact results
Margins are expected to remain under pressure from worldwide wage increases and costs associated with brand positioning in the U.S. Additionally, despite the weakening of the U.S. dollar against other major foreign currencies in the recent past, negative currency translation is still expected to dent profits in the second quarter.
Nonetheless, the company’s all-day Breakfast platform coupled with various sales initiatives like menu innovation, promotional offers and marketing strategies should somewhat aid top-line growth.
Earnings Whispers
Our proven model does not conclusively show that McDonald's is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: McDonald's has an earnings ESP of -0.72%. This is because the Most Accurate estimate stands at $1.38, whereas the Zacks Consensus Estimate is pegged higher at $1.39.
Zacks Rank: McDonald's has a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some restaurant companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Papa John's International Inc. (PZZA - Free Report) has an earnings ESP of +3.70% and a Zacks Rank #2.
Jack in the Box Inc. (JACK - Free Report) has an earnings ESP of +1.15% and a Zacks Rank #2.
Shake Shack Inc. (SHAK - Free Report) has an earnings ESP of +7.69% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
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McDonald's (MCD) Q2 Earnings: Disappointment in Store?
McDonald's Corp. (MCD - Free Report) is scheduled to report second-quarter 2016 results on Jul 26, before the opening bell.
Last quarter, McDonald's posted a 6.03% positive earnings surprise. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in all of the last four quarters, with an average beat of 5.70%.
Let’s see how things are shaping up for this announcement.
MCDONALDS CORP Price and EPS Surprise
MCDONALDS CORP Price and EPS Surprise | MCDONALDS CORP Quote
Factors Likely to Influence this Quarter
Though McDonald’s posted positive comps over the past three quarters, the guest count remained sluggish. We expect traffic trends to continue to be weak in certain major international markets in the second quarter as well.
Importantly, a slowdown in the Chinese economy is hurting sales in the region, which accounts for a large chunk of McDonald’s revenues thereby hampering the overall top-line performance. We expect the weak sales trends to continue in the second quarter. Meanwhile, macroeconomic uncertainties and decreasing consumer purchasing power in Russia coupled with challenging economic/political conditions in Europe may further impact results
Margins are expected to remain under pressure from worldwide wage increases and costs associated with brand positioning in the U.S. Additionally, despite the weakening of the U.S. dollar against other major foreign currencies in the recent past, negative currency translation is still expected to dent profits in the second quarter.
Nonetheless, the company’s all-day Breakfast platform coupled with various sales initiatives like menu innovation, promotional offers and marketing strategies should somewhat aid top-line growth.
Earnings Whispers
Our proven model does not conclusively show that McDonald's is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: McDonald's has an earnings ESP of -0.72%. This is because the Most Accurate estimate stands at $1.38, whereas the Zacks Consensus Estimate is pegged higher at $1.39.
Zacks Rank: McDonald's has a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some restaurant companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Papa John's International Inc. (PZZA - Free Report) has an earnings ESP of +3.70% and a Zacks Rank #2.
Jack in the Box Inc. (JACK - Free Report) has an earnings ESP of +1.15% and a Zacks Rank #2.
Shake Shack Inc. (SHAK - Free Report) has an earnings ESP of +7.69% and a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>