McDonald's Corporation (MCD - Free Report) reported impressive fourth-quarter 2018 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate.
Adjusted earnings of $1.97 per share surpassed the consensus mark of $1.90 and increased 15% from the year-ago quarter number (18% in constant currencies). The upside reflects stronger operating performance.
Meanwhile, foreign currency translation had a negative impact of 5 cents per share on earnings in the quarter under review. Following the quarterly results, not much movement was noticed in the stock during the pre-market trading session. In the past six months, the stock has gained 17% compared with industry’s 14.9% growth.
Revenues Decline but Global Comps Improve
In the quarter under review, revenues of $5,163 million outpaced the Zacks Consensus Estimate of $5,159 million but decreased 3% year over year. This downturn reflects the impact of the company’s strategic refranchising initiatives. However, on a constant-currency basis, the metric remained flat on a year-over-year basis.
At company-operated restaurants, revenues decreased 11% year over year to $2,371.2 million. However, the same at franchise-operated restaurants improved 5% to $2,791.8 million.
Global comps grew 4.4% driven by positive comparable sales across all segments. Notably, this marked the fourteenth consecutive quarter of positive comparable sales. In the third quarter of 2018, comps were up 4.2%.
Solid Comps Across Segments
U.S.: Comps at this segment grew 2.3% in the fourth quarter owing to increase in average check resulting from rise in menu price as well as product mix shift. Comps growth, however, was lower than the prior-quarter rise of 2.4%.
Segment operating income declined 1% on increase in franchised margin dollars and G&A savings.
McDonald's Corporation Price, Consensus and EPS Surprise
International Lead Markets: Comps at this segment rose 5.2% year over year, narrower than a 5.4% rise registered in the last reported quarter. Robust sales in the United Kingdom, Australia and Germany drove comps.
Operating income improved 8%, including the impact of foreign currency translation. At constant currency, the figure increased 12%. This upside can be attributed to sales-driven improvements in franchised margin dollars and higher gains on sales of restaurant businesses in the U.K. as well as Australia.
High-Growth Markets: Comps at this segment were up 4.8%, higher than the prior-quarter’s increase of 4.6%. Solid performance in Italy and the Netherlands as well as positive results across majority of the segments led to the upside. In the meantime, operating income declined 44% including the impact of foreign currency translation. At constant currency, the metric decreased 41%.
Foundational Markets: Comps at this segment grew 7.1% on the back of positive sales performance across all geographic regions, mostly in Japan. Notably, the reported figure was higher than 6% growth in the third quarter.
Other Financial Information
Cash and cash equivalent at the end of Dec 31, 2018 amounted to $866 million compared with $2,463.8 million at the end of prior year quarter. Long-term debt increased to $31,075.3 million at the end of quarter from $29,536.4 million at the end of 2017. Free cash flow totaled $4,225 million.
Zacks Rank & Key Picks
McDonald's carries a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the same space include Starbucks Corporation (SBUX - Free Report) , Wingstop Inc. (WING - Free Report) Darden Restaurants, Inc. (DRI - Free Report) each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Starbucks has reported better-than-expected earnings in the trailing three quarters.
Wingstop long-term earnings are expected to grow by 19.5%.
Darden Restaurants’ current-year earnings are likely to witness an 18.3% growth.
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Free: See Our Top Stock and 4 Runners Up >>
McDonald's Corporation (MCD - Free Report) reported impressive fourth-quarter 2018 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate.
Adjusted earnings of $1.97 per share surpassed the consensus mark of $1.90 and increased 15% from the year-ago quarter number (18% in constant currencies). The upside reflects stronger operating performance.
Meanwhile, foreign currency translation had a negative impact of 5 cents per share on earnings in the quarter under review. Following the quarterly results, not much movement was noticed in the stock during the pre-market trading session. In the past six months, the stock has gained 17% compared with industry’s 14.9% growth.
Revenues Decline but Global Comps Improve
In the quarter under review, revenues of $5,163 million outpaced the Zacks Consensus Estimate of $5,159 million but decreased 3% year over year. This downturn reflects the impact of the company’s strategic refranchising initiatives. However, on a constant-currency basis, the metric remained flat on a year-over-year basis.
At company-operated restaurants, revenues decreased 11% year over year to $2,371.2 million. However, the same at franchise-operated restaurants improved 5% to $2,791.8 million.
Global comps grew 4.4% driven by positive comparable sales across all segments. Notably, this marked the fourteenth consecutive quarter of positive comparable sales. In the third quarter of 2018, comps were up 4.2%.
Solid Comps Across Segments
U.S.: Comps at this segment grew 2.3% in the fourth quarter owing to increase in average check resulting from rise in menu price as well as product mix shift. Comps growth, however, was lower than the prior-quarter rise of 2.4%.
Segment operating income declined 1% on increase in franchised margin dollars and G&A savings.
McDonald's Corporation Price, Consensus and EPS Surprise
International Lead Markets: Comps at this segment rose 5.2% year over year, narrower than a 5.4% rise registered in the last reported quarter. Robust sales in the United Kingdom, Australia and Germany drove comps.
Operating income improved 8%, including the impact of foreign currency translation. At constant currency, the figure increased 12%. This upside can be attributed to sales-driven improvements in franchised margin dollars and higher gains on sales of restaurant businesses in the U.K. as well as Australia.
High-Growth Markets: Comps at this segment were up 4.8%, higher than the prior-quarter’s increase of 4.6%. Solid performance in Italy and the Netherlands as well as positive results across majority of the segments led to the upside. In the meantime, operating income declined 44% including the impact of foreign currency translation. At constant currency, the metric decreased 41%.
Foundational Markets: Comps at this segment grew 7.1% on the back of positive sales performance across all geographic regions, mostly in Japan. Notably, the reported figure was higher than 6% growth in the third quarter.
Other Financial Information
Cash and cash equivalent at the end of Dec 31, 2018 amounted to $866 million compared with $2,463.8 million at the end of prior year quarter. Long-term debt increased to $31,075.3 million at the end of quarter from $29,536.4 million at the end of 2017. Free cash flow totaled $4,225 million.
Zacks Rank & Key Picks
McDonald's carries a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the same space include Starbucks Corporation (SBUX - Free Report) , Wingstop Inc. (WING - Free Report) Darden Restaurants, Inc. (DRI - Free Report) each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Starbucks has reported better-than-expected earnings in the trailing three quarters.
Wingstop long-term earnings are expected to grow by 19.5%.
Darden Restaurants’ current-year earnings are likely to witness an 18.3% growth.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
See Stocks Today >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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