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McDonald's (MCD) Q1 Earnings: Guest Traffic to Drive Comps
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McDonald's Corp. (MCD - Free Report) is set to report its first-quarter 2018 financial numbers on Apr 30, before the opening bell.
In the last reported quarter, the company pulled off a positive earnings surprise of 7.6%. Also, McDonald's earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 6.6%.
What to Expect?
The question lingering in investors’ minds now is whether McDonald's will be able to deliver a positive earnings surprise in the quarter to be reported. The Zacks Consensus Estimate for the first quarter is pegged at $1.67, higher than $1.47 in the year-ago quarter. Of late, the company’s earnings estimates have been stable. In the fourth quarter of 2017, the company’s witnessed earnings growth of 19% on a year-over-year basis.
Meanwhile, analysts polled by Zacks expect revenues of nearly $4,915 million, down more than 13% from the prior-year quarter.
Let’s delve deeper to find out how the company’s top and bottom lines will shape up this earnings season.
Comps Growth to Continue
McDonald’s, which has reported comparable sales growth for 10 straight quarters, is likely to continue the uptrend in first-quarter 2018. Moreover, the company has been increasingly focusing on growing guest traffic in a bid to boost comps growth. In this regard, McDonald’s is striving to achieve operational excellence, innovate, offer a value menu and roll out more limited-time offerings. Also, the company expects its velocity accelerators of Experience of the Future, digital and delivery to drive growth over the long term.
Meanwhile, McDonald’s is consistently trying to improve its performance in the International Lead Markets, which include Australia, Canada, France, Germany and the UK. The company intends to drive comps growth in these markets through introduction of value meals, customizing the menu to local customer tastes, reimaging of restaurants, efficient marketing and promotions, improved service and increased convenience via delivery.
McDonald's Corporation Price, Consensus and EPS Surprise
Despite the above-mentioned tailwinds, a challenging restaurant environment might lead to a decline in revenues at the U.S. segment. The Zacks Consensus Estimate for revenues at this segment is pegged at $1.81 billion, reflecting a year-over-year decline of 5.8%.
Also, revenues from High-Growth Markets are likely to witness a sharp decline of 42% to $891 million. Political and economic unrest are likely hurt sales. Coming to international lead market, the Zacks Consensus Estimate for revenues is pegged at $1.64 billion, reflecting a year-over-year decline of 0.4%.
At the company-operated restaurants, revenues are likely to continue decreasing in the to-be-reported quarter. In fourth- and third-quarter 2017, revenues from the same have witnessed a sharp decline of 26.8% and 23%, respectively. In fact, the Zacks Consensus Estimate is pegged at $2.45 billion for the quarter under review, mirroring a year-over-year decline of 27.3%.
Re-franchising Strategy Safeguards Earnings
Management’s re-franchising strategy involves a shift to a greater percentage of franchised restaurants. The reduction in ownership, i.e. re-franchising, weighs on near-term revenues as it replaces company-operated sales by franchised sales. However, over the long term, McDonald’s is expected to reduce the company’s capital requirements and facilitate earnings per share growth and ROE expansion. In fact, owing to re-franchising and stringent spending, the company expects to achieve approximately $500 million of net annual savings on SG&A expenses by 2019, of which $300 million has been realized in 2017.
What Does the Zacks Model Unveil?
Our proven model does not show that McDonald’s is likely to beat earnings estimates 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
McDonald’s has an Earnings ESP of -0.10%. Although, the company’s Zacks Rank #3 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.
Stocks to Consider
Here are a few other stocks from the Restaurant space that investors may consider, as our model shows that they also have the right combination of elements to post an earnings beat this quarter:
Jack in the Box Inc. (JACK - Free Report) has an Earnings ESP of +0.23% and a Zacks Rank of 3.
Brinker International, Inc. (EAT - Free Report) has an Earnings ESP of +1.62% and a Zacks Rank #3.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Image: Bigstock
McDonald's (MCD) Q1 Earnings: Guest Traffic to Drive Comps
McDonald's Corp. (MCD - Free Report) is set to report its first-quarter 2018 financial numbers on Apr 30, before the opening bell.
In the last reported quarter, the company pulled off a positive earnings surprise of 7.6%. Also, McDonald's earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 6.6%.
What to Expect?
The question lingering in investors’ minds now is whether McDonald's will be able to deliver a positive earnings surprise in the quarter to be reported. The Zacks Consensus Estimate for the first quarter is pegged at $1.67, higher than $1.47 in the year-ago quarter. Of late, the company’s earnings estimates have been stable. In the fourth quarter of 2017, the company’s witnessed earnings growth of 19% on a year-over-year basis.
Meanwhile, analysts polled by Zacks expect revenues of nearly $4,915 million, down more than 13% from the prior-year quarter.
Let’s delve deeper to find out how the company’s top and bottom lines will shape up this earnings season.
Comps Growth to Continue
McDonald’s, which has reported comparable sales growth for 10 straight quarters, is likely to continue the uptrend in first-quarter 2018. Moreover, the company has been increasingly focusing on growing guest traffic in a bid to boost comps growth. In this regard, McDonald’s is striving to achieve operational excellence, innovate, offer a value menu and roll out more limited-time offerings. Also, the company expects its velocity accelerators of Experience of the Future, digital and delivery to drive growth over the long term.
Meanwhile, McDonald’s is consistently trying to improve its performance in the International Lead Markets, which include Australia, Canada, France, Germany and the UK. The company intends to drive comps growth in these markets through introduction of value meals, customizing the menu to local customer tastes, reimaging of restaurants, efficient marketing and promotions, improved service and increased convenience via delivery.
McDonald's Corporation Price, Consensus and EPS Surprise
McDonald's Corporation Price, Consensus and EPS Surprise | McDonald's Corporation Quote
Revenue Woes to Linger
Despite the above-mentioned tailwinds, a challenging restaurant environment might lead to a decline in revenues at the U.S. segment. The Zacks Consensus Estimate for revenues at this segment is pegged at $1.81 billion, reflecting a year-over-year decline of 5.8%.
Also, revenues from High-Growth Markets are likely to witness a sharp decline of 42% to $891 million. Political and economic unrest are likely hurt sales. Coming to international lead market, the Zacks Consensus Estimate for revenues is pegged at $1.64 billion, reflecting a year-over-year decline of 0.4%.
At the company-operated restaurants, revenues are likely to continue decreasing in the to-be-reported quarter. In fourth- and third-quarter 2017, revenues from the same have witnessed a sharp decline of 26.8% and 23%, respectively. In fact, the Zacks Consensus Estimate is pegged at $2.45 billion for the quarter under review, mirroring a year-over-year decline of 27.3%.
Re-franchising Strategy Safeguards Earnings
Management’s re-franchising strategy involves a shift to a greater percentage of franchised restaurants. The reduction in ownership, i.e. re-franchising, weighs on near-term revenues as it replaces company-operated sales by franchised sales. However, over the long term, McDonald’s is expected to reduce the company’s capital requirements and facilitate earnings per share growth and ROE expansion. In fact, owing to re-franchising and stringent spending, the company expects to achieve approximately $500 million of net annual savings on SG&A expenses by 2019, of which $300 million has been realized in 2017.
What Does the Zacks Model Unveil?
Our proven model does not show that McDonald’s is likely to beat earnings estimates 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
McDonald’s has an Earnings ESP of -0.10%. Although, the company’s Zacks Rank #3 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.
Stocks to Consider
Here are a few other stocks from the Restaurant space that investors may consider, as our model shows that they also have the right combination of elements to post an earnings beat this quarter:
Ruth's Hospitality Group, Inc. has an Earnings ESP of +1.70% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Jack in the Box Inc. (JACK - Free Report) has an Earnings ESP of +0.23% and a Zacks Rank of 3.
Brinker International, Inc. (EAT - Free Report) has an Earnings ESP of +1.62% and a Zacks Rank #3.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Click here to see them >>