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McDonald's Q3 Earnings Beat on Franchised Margins, Revenues Miss
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Key Takeaways
McDonald's adjusted EPS rose 11% to $3.57, beating estimates, while revenues of $7.16B missed forecasts.
Global comparable sales rose 1.5% as international gains offset a 0.2% decline in U.S. comparable sales.
Franchised restaurant margins grew 3% to $3.80B, accounting for about 90% of total restaurant margins.
McDonald's Corporation (MCD - Free Report) reported third-quarter 2026 results, wherein earnings surpassed the Zacks Consensus Estimate, but revenues missed the same.
McDonald's reported adjusted earnings per share (EPS) of $3.57, up 11% year over year, and beat the consensus mark of $3.36 by 6.3%. Higher sales-driven franchised margins and other operating income supported earnings.
Revenues increased 1% year over year to $7.16 billion but missed the consensus estimate of $7.28 billion by 1.7%. Global comparable sales increased 1.5%, as growth in international markets more than offset a slight decline in the United States.
Following the results, MCD stock gained 2.7% during today’s pre-market trading session.
MCD's Comparable Sales Reflect International Strength
Global comparable sales growth moderated from 3.6% in the prior-year quarter. U.S. comparable sales slipped 0.2% against an increase of 2.4% a year earlier. Negative comparable guest counts were largely offset by higher average checks.
International Operated Markets comparable sales rose 1.4%, led by Germany and Australia, partly offset by France. International Developmental Licensed Markets advanced 4.2%, with Japan leading growth while China posted negative comparable sales. The two segments had registered increases of 4.3% and 4.7%, respectively, in the year-ago period.
MCD's Systemwide Sales Gain Across Markets
Global systemwide sales increased 4%, both on a reported and constant-currency basis, to more than $38 billion. U.S. systemwide sales grew 1%, while International Operated Markets and International Developmental Licensed Markets registered gains of 3% and 9%, respectively.
Loyalty remained an important part of the company's sales base. Across 70 markets with loyalty programs, systemwide sales to loyalty members exceeded $11 billion for the quarter and reached $41 billion over the trailing 12 months. McDonald's operated 46,554 restaurants worldwide at September-end, up from 44,599 a year earlier.
Franchised restaurant revenues increased 3% to $4.49 billion. The U.S. and International Operated Markets each reported 2% growth, while International Developmental Licensed Markets and Corporate rose 8%. Franchised restaurants represented approximately 95% of McDonald's global locations at quarter-end.
Sales from company-owned and operated restaurants declined 3% to $2.48 billion. U.S. sales decreased 6%, while International Operated Markets fell 3%. International Developmental Licensed Markets and Corporate grew 15%. Other revenues climbed 26% to $189 million, comprising primarily technology-related fees and brand licensing arrangements.
McDonald's Restaurant Margins Show Mixed Trends
Franchised restaurant margins increased 3% to $3.8 billion, benefiting from stronger franchised sales across all segments. These margins represented approximately 90% of total restaurant margin dollars, underscoring the significance of the franchise model to McDonald's operating performance.
Company-owned and operated restaurant margins were roughly flat at $392 million versus $391 million a year earlier. U.S. margins dropped 16% to $75 million, reflecting ongoing inflationary cost pressures. International Operated Markets margins increased 4% to $299 million. Total restaurant margins increased 3% to $4.19 billion.
MCD's Operating Income Benefits From Higher Gains
Consolidated operating income rose 7% to $3.6 billion. Results included $56 million in pre-tax charges, primarily tied to the Accelerating the Organization restructuring initiative, compared with $39 million a year earlier. Excluding these charges, operating income increased 8% to $3.65 billion.
Selling, general and administrative expenses declined 3% to $759 million, primarily because the prior-year quarter included higher marketing spending. Other operating income rose to $139 million from $37 million, supported by greater gains on restaurant sales and excess properties. Net income increased 9% to $2.49 billion.
MCD's 2026 Outlook Targets Restaurant Expansion
McDonald's still expects roughly $3.7 billion in capital expenditures in 2026, primarily for new restaurants in the U.S. and International Operated Markets. It projects about 2,500 openings and approximately 2,100 net additions, with net restaurant growth contributing roughly 2.5% to constant-currency systemwide sales growth.
Management expects an operating margin in the mid-to-high 40% range and selling, general and administrative expenses of about 2.2% of systemwide sales. Interest expense is projected to rise 4-6%, while the effective tax rate is expected at 21-23%. The company targets a low-to-mid 80% free cash flow conversion rate.
Chipotle Mexican Grill, Inc. (CMG - Free Report) reported third-quarter 2026 adjusted earnings of 27 cents per share, missing the Zacks Consensus Estimate of 29 cents by 6.9%. Earnings declined 6.9% from 29 cents per share in the year-ago quarter.
Chipotle’s quarterly revenues of $3.293 billion surpassed the consensus mark of $3.288 billion by 0.2% and increased 9.6% year over year. Growth was driven by new restaurant openings and comparable restaurant sales growth of 2.1%. Comps benefited from a 0.8% increase in transactions and a 1.3% rise in average checks. Digital sales contributed 38.8% to total food and beverage revenues. CMG opened 84 company-operated restaurants and five partner-operated restaurants internationally during the quarter.
Starbucks Corporation (SBUX - Free Report) reported fourth-quarter fiscal 2026 adjusted earnings of 80 cents per share, surpassing the Zacks Consensus Estimate of 73 cents by 9.6%. Earnings increased 53.8% year over year.
Starbucks’ net revenues of $9.14 billion missed the consensus mark of $9.27 billion by 1.4% and declined 4.5% year over year. Results benefited from stronger sales leverage and lower costs, while the shift to a licensed business in China weighed on reported revenues. Global comparable coffeehouse sales increased 7.2%. North America comparable sales advanced 7.9%, supported by higher average ticket and transactions. For fiscal 2027, SBUX expects non-GAAP earnings of $3.15-$3.25 per share and North America comparable sales growth of approximately 4%.
Domino’s Pizza, Inc. (DPZ - Free Report) reported third-quarter fiscal 2026 earnings of $4.60 per share, surpassing the Zacks Consensus Estimate of $4.33 by 6.2%. Earnings increased 12.7% from $4.08 per share in the year-ago quarter.
Domino’s quarterly revenues of $1.19 billion topped the consensus projection of $1.17 billion by 1.6% and increased from $1.15 billion a year ago. Growth was driven by higher supply chain revenues and global franchise royalties, which more than offset lower U.S. company-owned store revenues following refranchising. Supply chain revenues increased 7.1% year over year to $746.2 million, supported by higher order volumes and a 2.2% increase in food basket pricing. However, sluggish U.S. and international same-store sales and lower franchise advertising revenues partially offset the gains.
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McDonald's Q3 Earnings Beat on Franchised Margins, Revenues Miss
Key Takeaways
McDonald's Corporation (MCD - Free Report) reported third-quarter 2026 results, wherein earnings surpassed the Zacks Consensus Estimate, but revenues missed the same.
McDonald's reported adjusted earnings per share (EPS) of $3.57, up 11% year over year, and beat the consensus mark of $3.36 by 6.3%. Higher sales-driven franchised margins and other operating income supported earnings.
McDonald's Corporation Price and EPS Surprise
McDonald's Corporation price-eps-surprise | McDonald's Corporation Quote
Revenues increased 1% year over year to $7.16 billion but missed the consensus estimate of $7.28 billion by 1.7%. Global comparable sales increased 1.5%, as growth in international markets more than offset a slight decline in the United States.
Following the results, MCD stock gained 2.7% during today’s pre-market trading session.
MCD's Comparable Sales Reflect International Strength
Global comparable sales growth moderated from 3.6% in the prior-year quarter. U.S. comparable sales slipped 0.2% against an increase of 2.4% a year earlier. Negative comparable guest counts were largely offset by higher average checks.
International Operated Markets comparable sales rose 1.4%, led by Germany and Australia, partly offset by France. International Developmental Licensed Markets advanced 4.2%, with Japan leading growth while China posted negative comparable sales. The two segments had registered increases of 4.3% and 4.7%, respectively, in the year-ago period.
MCD's Systemwide Sales Gain Across Markets
Global systemwide sales increased 4%, both on a reported and constant-currency basis, to more than $38 billion. U.S. systemwide sales grew 1%, while International Operated Markets and International Developmental Licensed Markets registered gains of 3% and 9%, respectively.
Loyalty remained an important part of the company's sales base. Across 70 markets with loyalty programs, systemwide sales to loyalty members exceeded $11 billion for the quarter and reached $41 billion over the trailing 12 months. McDonald's operated 46,554 restaurants worldwide at September-end, up from 44,599 a year earlier.
McDonald's Revenue Mix Favors Franchised Operations
Franchised restaurant revenues increased 3% to $4.49 billion. The U.S. and International Operated Markets each reported 2% growth, while International Developmental Licensed Markets and Corporate rose 8%. Franchised restaurants represented approximately 95% of McDonald's global locations at quarter-end.
Sales from company-owned and operated restaurants declined 3% to $2.48 billion. U.S. sales decreased 6%, while International Operated Markets fell 3%. International Developmental Licensed Markets and Corporate grew 15%. Other revenues climbed 26% to $189 million, comprising primarily technology-related fees and brand licensing arrangements.
McDonald's Restaurant Margins Show Mixed Trends
Franchised restaurant margins increased 3% to $3.8 billion, benefiting from stronger franchised sales across all segments. These margins represented approximately 90% of total restaurant margin dollars, underscoring the significance of the franchise model to McDonald's operating performance.
Company-owned and operated restaurant margins were roughly flat at $392 million versus $391 million a year earlier. U.S. margins dropped 16% to $75 million, reflecting ongoing inflationary cost pressures. International Operated Markets margins increased 4% to $299 million. Total restaurant margins increased 3% to $4.19 billion.
MCD's Operating Income Benefits From Higher Gains
Consolidated operating income rose 7% to $3.6 billion. Results included $56 million in pre-tax charges, primarily tied to the Accelerating the Organization restructuring initiative, compared with $39 million a year earlier. Excluding these charges, operating income increased 8% to $3.65 billion.
Selling, general and administrative expenses declined 3% to $759 million, primarily because the prior-year quarter included higher marketing spending. Other operating income rose to $139 million from $37 million, supported by greater gains on restaurant sales and excess properties. Net income increased 9% to $2.49 billion.
MCD's 2026 Outlook Targets Restaurant Expansion
McDonald's still expects roughly $3.7 billion in capital expenditures in 2026, primarily for new restaurants in the U.S. and International Operated Markets. It projects about 2,500 openings and approximately 2,100 net additions, with net restaurant growth contributing roughly 2.5% to constant-currency systemwide sales growth.
Management expects an operating margin in the mid-to-high 40% range and selling, general and administrative expenses of about 2.2% of systemwide sales. Interest expense is projected to rise 4-6%, while the effective tax rate is expected at 21-23%. The company targets a low-to-mid 80% free cash flow conversion rate.
MCD’s Zacks Rank & Recent Retail-Wholesale Releases
MCD currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chipotle Mexican Grill, Inc. (CMG - Free Report) reported third-quarter 2026 adjusted earnings of 27 cents per share, missing the Zacks Consensus Estimate of 29 cents by 6.9%. Earnings declined 6.9% from 29 cents per share in the year-ago quarter.
Chipotle’s quarterly revenues of $3.293 billion surpassed the consensus mark of $3.288 billion by 0.2% and increased 9.6% year over year. Growth was driven by new restaurant openings and comparable restaurant sales growth of 2.1%. Comps benefited from a 0.8% increase in transactions and a 1.3% rise in average checks. Digital sales contributed 38.8% to total food and beverage revenues. CMG opened 84 company-operated restaurants and five partner-operated restaurants internationally during the quarter.
Starbucks Corporation (SBUX - Free Report) reported fourth-quarter fiscal 2026 adjusted earnings of 80 cents per share, surpassing the Zacks Consensus Estimate of 73 cents by 9.6%. Earnings increased 53.8% year over year.
Starbucks’ net revenues of $9.14 billion missed the consensus mark of $9.27 billion by 1.4% and declined 4.5% year over year. Results benefited from stronger sales leverage and lower costs, while the shift to a licensed business in China weighed on reported revenues. Global comparable coffeehouse sales increased 7.2%. North America comparable sales advanced 7.9%, supported by higher average ticket and transactions. For fiscal 2027, SBUX expects non-GAAP earnings of $3.15-$3.25 per share and North America comparable sales growth of approximately 4%.
Domino’s Pizza, Inc. (DPZ - Free Report) reported third-quarter fiscal 2026 earnings of $4.60 per share, surpassing the Zacks Consensus Estimate of $4.33 by 6.2%. Earnings increased 12.7% from $4.08 per share in the year-ago quarter.
Domino’s quarterly revenues of $1.19 billion topped the consensus projection of $1.17 billion by 1.6% and increased from $1.15 billion a year ago. Growth was driven by higher supply chain revenues and global franchise royalties, which more than offset lower U.S. company-owned store revenues following refranchising. Supply chain revenues increased 7.1% year over year to $746.2 million, supported by higher order volumes and a 2.2% increase in food basket pricing. However, sluggish U.S. and international same-store sales and lower franchise advertising revenues partially offset the gains.