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McDonald's Q1 Earnings Preview: How will the Coronavirus Impact Sales?

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McDonald’s (MCD - Free Report) is set to report its Q1 fiscal 2020 financial results on Thursday, April 30 amid a hectic week on Wall Street that features lots of big names, including tech giants such as Apple (AAPL - Free Report) and Amazon (AMZN - Free Report) . The global hamburger giant’s drive-through business should help it remain somewhat immune to the coronavirus, but McDonald’s might help prove that no one is safe from the pandemic.

Coronavirus Impact

McDonald’s in mid-March joined a slew of restaurants who announced they would close all dine-in options as part of the social distancing and stay-at-home push. MCD is safer than sit-down style operations that don’t have drive-through offerings, or do a ton of carry out business. That said, the coronavirus is set to take its toll on industry heavyweights from Starbucks (SBUX - Free Report) to Chipotle (CMG - Free Report) .

MCD already released some early pandemic-included figures on April 8. The restaurant chain said that its same-store sales tumbled 22% in March, after they jumped 7.2% during the first two months of the year. Meanwhile, McDonald’s saw its vital U.S same-store sales fall 13.4% last month, and let’s not forget that it didn’t close its dining rooms until the middle of March.

 

 

 

 

 

 

Overall, McDonald’s said its global comparable sales slipped 3.4% for the quarter, while U.S. same-store sales popped just 0.1%. McDonald’s said 99% of its U.S. restaurants are offering at least some service via delivery—through partnerships with Uber (UBER - Free Report) Eats and DoorDash—drive-through, and/or take-away.

Helping highlight the overall economic uncertainty, MCD’s withdrew its “2020 Outlook and its Long-Term Outlook.” Investors should also note that it suspended its share repurchase program, increased its “cash position by raising $6.5 billion in the debt markets during the first quarter,” and said it expects to reduce its capital expenditures by approximately $1 billion for 2020.

Outlook

Our current Zacks estimates project MCD’s adjusted Q1 EPS figure will fall 7.6% to $1.59 a share, on 4.6% lower sales. Peeking ahead, McDonald’s Q2 earnings are projected to plummet roughly 60%, with revenue expected to sink 35.4%.                    

MCD’s downward earnings revision trends help it earn a Zacks Rank #4 (Sell) right now. More specifically, the company’s first-quarter consensus estimate has slipped nearly 17%, with its second-quarter figure down over 61% from where it was 60 days ago.

 

 

 

 

 

 

 

Bottom Line

McDonald’s is likely still a solid, longer-term pick within the broader restaurant space and its 2.69% dividend yield tops the S&P 500’s 2.02% average, as well as rival Yum! Brands (YUM - Free Report) . MCD stock has also surged 30% from its March 23 lows and popped again on Monday. Despite the recent run, McDonald’s shares rest around 16% below their 52-weeks highs.

Some investors might want to think about scooping up MCD stock at a discount. But it is likely prudent to wait for its actual results, updated outlook, and Wall Street’s reaction.

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