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McDonald's (MCD) to Post Q2 Earnings: What's in the Cards?

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McDonald's Corporation (MCD - Free Report) is scheduled to report second-quarter 2022 results on Jul 26, before the opening bell. In the last reported quarter, the company delivered an earnings surprise of 4.6%.

How are Estimates Placed?

The Zacks Consensus Estimate for second-quarter earnings is pegged at $2.46 per share, indicating a rise of 3.8% from $2.37 reported in the year-ago quarter.

For revenues, the consensus mark is pegged at $5,878 million. The metric suggests a deterioration of 0.2% from the year-ago 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 second-quarter performance is likely to have benefitted from digital efforts, strong marketing campaigns, robust drive-thru presence and expansion initiatives. This and solid enrolment and participation in the loyalty program, frequent visits from loyalty customers (driven by loyalty usage and app exclusive promotions) and increased app adoption are likely to have aided the company’s performance in the to-be-reported quarter.

During the previous quarter, the company noted that digital sales (including the mobile app, kiosks and delivery) in its top six markets were more than 30% of system-wide sales. Also, it reported a higher percentage of sales in the drive-thru compared to pre-pandemic levels. Given the emphasis on strategic partnerships (with Just Eat Takeaway), integration of capabilities across ordering channels and app engagement initiatives (with digital-only promotions including delivery offers and subscription cards), the momentum is likely to have continued in the to-be-reported quarter.

The company’s second-quarter top line is likely to reflect an improvement in comps on average check growth, menu price increases and compelling value programs. In the previous quarter’s earnings call, the company mentioned witnessing positive comps growth across the United States, Japan and Latin America. Nevertheless, with heightened digital engagement and strong menu initiatives, the momentum is likely to have continued in the second quarter as well.

However, coronavirus-induced labor shortages, supply chain delays and geopolitical tensions are likely to have affected the company’s operations in the second quarter. This and rising consumer inflation levels are likely to have impacted margins in the to-be-reported quarter.

What Our Model Says

Our proven model predicts an earnings beat for McDonald’s this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: McDonald’s has an Earnings ESP of +3.58%. 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 #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks Poised to Beat Earnings Estimates

Here are some other 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:

Chipotle Mexican Grill, Inc. (CMG - Free Report) has an Earnings ESP of +0.46% and a Zacks Rank #3.

Shares of Chipotle have declined 14.7% in the past year. CMG’s earnings beat the consensus mark in each of the trailing four quarters, the average surprise being 9.3%.

Domino's Pizza, Inc. (DPZ - Free Report) has an Earnings ESP of +1.26% and a Zacks Rank #3.

Shares of Domino's have declined 13.6% in the past year. DPZ’s earnings beat estimates in two of the trailing four quarters and missed twice, the negative average surprise being 1.62%.

Burlington Stores, Inc. (BURL - Free Report) has an Earnings ESP of +22.50% and a Zacks Rank #3.

Shares of Burlington Stores have declined 53.8% in the past year. BURL’s earnings beat estimates in two of the trailing four quarters and missed twice, the negative average surprise being 0.6%.

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

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