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Why Is McDonald's (MCD) Down 1.3% Since Last Earnings Report?
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It has been about a month since the last earnings report for McDonald's (MCD - Free Report) . Shares have lost about 1.3% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is McDonald's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
McDonald's reported fourth-quarter 2022 results, with earnings and revenues beating the Zacks Consensus Estimate. The top line declined year over year, while the bottom line increased from the prior-year quarter's figure.
Earnings & Revenue Discussion
During fourth-quarter 2022, McDonald's reported adjusted earnings per share (EPS) of $2.59, surpassing the Zacks Consensus Estimate of $2.46 by 5.3%. In the prior-year quarter, MCD reported an adjusted EPS of $2.18.
Quarterly net revenues of $5,926.5 million beat the consensus mark of $5,704 million by 3.9%. The top line fell 1% year over year.
At company-operated restaurants, sales were $2,208.4 million, down 13% year over year. The same at franchise-operated restaurants was $3,645 million, up 7% year over year.
Comps Details
In the quarter under discussion, global comps increased 12.6% compared with a rise of 12.3% reported in the prior-year quarter.
Strong Comps Across Segments
U.S.: During the fourth quarter, comps in the segment rose 10.3% year over year, while a gain of 7.5% was reported in the prior-year period. This marks the 10th consecutive quarter of comps growth for the segment. McDonald’s’ comps for the quarter benefited from a menu price increase, positive guest counts and marketing initiatives. This and continued digital and delivery growth contributed to the upside.
International Operated Markets: Comps in the segment increased 12.6% year over year compared with a gain of 16.8% reported in the year-ago quarter. MCD gained from strong comparable sales in Germany, the U.K. and France.
International Developmental Licensed Segment: During the quarter, the segment’s comparable sales increased 16.5% year over year compared with a gain of 14.2% reported in the year-ago quarter. McDonald's gained from robust performance in Japan and Brazil. However, this was partially offset by negative comps in China due to COVID-19-related government restrictions.
Operating Highlights & Expenses
During the fourth quarter, McDonald’s total operating costs and expenses came in at $3,343.8 million, down 7% from the prior-year quarter’s levels.
During the quarter, operating income increased 8% year over year to $2,582.7 million. Net income during the quarter totaled $1,903.4 million, up 16% from $1,638.8 million in the year-ago quarter.
Balance Sheet
As of Dec 31, 2022, cash and equivalents came in at $2,583.8 million compared with $4,709.2 million as of Dec 31, 2021.
Long-term debt as of Dec 31, 2022, was $35,903.5 million compared with $35,622.7 million as of Dec 31, 2021.
2022 Highlights
Total revenues in 2022 amounted to $23,182.6 million compared with $23,222.9 million in 2021.
Net Income in 2022 came in at $6,177.4 million compared with $7,545.2 million reported in 2021.
In 2022, diluted EPS came in at $8.33 compared with $10.04 reported in the previous year.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, McDonald's has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, McDonald's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is McDonald's (MCD) Down 1.3% Since Last Earnings Report?
It has been about a month since the last earnings report for McDonald's (MCD - Free Report) . Shares have lost about 1.3% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is McDonald's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
McDonald's Q4 Earnings & Revenues Surpass Estimates
McDonald's reported fourth-quarter 2022 results, with earnings and revenues beating the Zacks Consensus Estimate. The top line declined year over year, while the bottom line increased from the prior-year quarter's figure.
Earnings & Revenue Discussion
During fourth-quarter 2022, McDonald's reported adjusted earnings per share (EPS) of $2.59, surpassing the Zacks Consensus Estimate of $2.46 by 5.3%. In the prior-year quarter, MCD reported an adjusted EPS of $2.18.
Quarterly net revenues of $5,926.5 million beat the consensus mark of $5,704 million by 3.9%. The top line fell 1% year over year.
At company-operated restaurants, sales were $2,208.4 million, down 13% year over year. The same at franchise-operated restaurants was $3,645 million, up 7% year over year.
Comps Details
In the quarter under discussion, global comps increased 12.6% compared with a rise of 12.3% reported in the prior-year quarter.
Strong Comps Across Segments
U.S.: During the fourth quarter, comps in the segment rose 10.3% year over year, while a gain of 7.5% was reported in the prior-year period. This marks the 10th consecutive quarter of comps growth for the segment. McDonald’s’ comps for the quarter benefited from a menu price increase, positive guest counts and marketing initiatives. This and continued digital and delivery growth contributed to the upside.
International Operated Markets: Comps in the segment increased 12.6% year over year compared with a gain of 16.8% reported in the year-ago quarter. MCD gained from strong comparable sales in Germany, the U.K. and France.
International Developmental Licensed Segment: During the quarter, the segment’s comparable sales increased 16.5% year over year compared with a gain of 14.2% reported in the year-ago quarter. McDonald's gained from robust performance in Japan and Brazil. However, this was partially offset by negative comps in China due to COVID-19-related government restrictions.
Operating Highlights & Expenses
During the fourth quarter, McDonald’s total operating costs and expenses came in at $3,343.8 million, down 7% from the prior-year quarter’s levels.
During the quarter, operating income increased 8% year over year to $2,582.7 million. Net income during the quarter totaled $1,903.4 million, up 16% from $1,638.8 million in the year-ago quarter.
Balance Sheet
As of Dec 31, 2022, cash and equivalents came in at $2,583.8 million compared with $4,709.2 million as of Dec 31, 2021.
Long-term debt as of Dec 31, 2022, was $35,903.5 million compared with $35,622.7 million as of Dec 31, 2021.
2022 Highlights
Total revenues in 2022 amounted to $23,182.6 million compared with $23,222.9 million in 2021.
Net Income in 2022 came in at $6,177.4 million compared with $7,545.2 million reported in 2021.
In 2022, diluted EPS came in at $8.33 compared with $10.04 reported in the previous year.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, McDonald's has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, McDonald's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.