Back to top

Image: Bigstock

Factors Setting the Tone for McDonald's (MCD) Q1 Earnings

Read MoreHide Full Article

McDonald's Corporation (MCD - Free Report) is scheduled to report first-quarter 2022 results on Apr 28, before the opening bell. In the last reported quarter, the company reported a negative earnings surprise of 3.5%.

How are Estimates Placed?

The Zacks Consensus Estimate for first-quarter earnings is pegged at $2.18 per share, indicating an improvement of 13.5% from $1.92 reported in the year-ago quarter.

For revenues, the consensus mark is pegged at $5,552 million, suggesting growth of 8.4% from the prior-year quarter’s figure.

McDonald's Corporation Price and EPS Surprise

 

McDonald's Corporation Price and EPS Surprise

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

 

Let's take a look at how things have shaped up in the quarter.

Factors at Play

McDonald's first-quarter performance is likely to have benefitted from robust drive-thru presence, unit-expansion efforts and investments in delivery and digitization. During the previous quarter, the company reported a higher percentage of sales in the drive-thru compared to pre-pandemic levels. Backed by an emphasis on strategic partnerships (with Mastercard) coupled with the integration of capabilities across ordering channels, the momentum is likely to have continued in the to-be-reported quarter.

The company’s first-quarter top line is likely to reflect an improvement in comps on the back of average check growth, menu price increases, compelling value programs and new menu items. In the previous quarter’s earnings call, the company mentioned witnessing positive comps growth across all day-parts offerings in the United States. Nevertheless, with heightened digital and delivery engagement, the momentum is likely to have continued in the first quarter as well.

However, coronavirus-induced labor shortages and supply chain delays are likely to have negatively impacted the company’s performance in the first quarter. This along with rising consumer inflation levels is likely to have impacted margins in the to-be-reported quarter.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for McDonald’s this time around. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat estimates. But that's not the case here.

Earnings ESP: McDonald’s has an Earnings ESP of -2.18%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company has a Zacks Rank #4 (Sell).

Stocks Poised to Beat Earnings Estimates

Here are some stocks from the Zacks Retail-Wholesale space that investors may consider, as our model shows that these also have the right combination of elements to post an earnings beat:

Costco Wholesale Corporation (COST - Free Report) has an Earnings ESP of +1.39% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Costco Wholesale have gained 55.1% in the past year. COST’s earnings topped the consensus mark in each of the trailing four quarters. The company has a trailing four-quarter earnings surprise of 13.3%, on average.

Shake Shack Inc. (SHAK - Free Report) has an Earnings ESP of +6.85% and a Zacks Rank #3.

Shares of Shake Shack have declined 14.8% so far this year. SHAK’s earnings beat the consensus mark in each of the last four quarters. The company has a trailing four-quarter earnings surprise of 89.2%, on average.

Cracker Barrel Old Country Store, Inc. (CBRL - Free Report) has an Earnings ESP of +11.33% and a Zacks Rank #3.

Shares of Cracker Barrel have declined 27.7% in the past year. CBRL’s earnings topped the consensus mark twice but missed the same on two occasions. The company has a trailing four-quarter earnings surprise of 350.5%, on average.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.