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McDonald's (MCD) Gears Up for Q2 Earnings: A Beat in Store?

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McDonald's Corp. (MCD - Free Report) is scheduled to report its second-quarter 2019 financial numbers on Jul 26, before the opening bell. In the last reported quarter, the company’s missed the Zacks Consensus Estimate by a margin of 0.6%. However, in three of the trailing four quarters, the bottom line surpassed the consensus mark by an average of 3.2%.

Which Way Are Estimates Moving?

The Zacks Consensus Estimate for second-quarter earnings is pegged at $2.06, higher than $1.99 reported in the year-ago quarter. Over the past 30 days, the company’s earnings estimates have witnessed upward revisions by 0.5%. For quarterly revenues, the consensus mark stands at $5,335 million, suggesting a 0.4% decline from prior-year quarter’s reported figure.

Let’s delve deeper to find out how the company’s top and bottom lines will shape up this earnings season.

Factors at Play

McDonald’s top line in the second quarter of 2019 is likely to be impacted by decline in company-operated sales. Notably, the Zacks Consensus Estimate for the company-operated sales is likely to decline 7.9%. However, revenues at franchise-operated restaurants are expected to improve 6.2%.

McDonald’s, which reported comparable sales growth for 15 straight quarters, is likely to continue with the uptrend in second-quarter 2019. We believe the company’s sales-building initiatives are driving comparable sales (comps) globally. Increase in the global guest count is an added positive. Currently, Australia, Canada, France, Germany and Italy are all witnessing robust sales growth. In these markets, McDonald’s is driving comps through the introduction of value meals, customizing the menu to local customer tastes, reimaging of restaurants, efficient marketing and promotions, improved service and increased convenience via delivery.

McDonald’s earnings in the second quarter are likely to improve on a year-over-year basis. Although the refranchising initiatives are hurting the top line, it is facilitating bottom-line growth.

McDonald's Corporation Price and EPS Surprise

McDonald's Corporation Price and EPS Surprise

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

What Does the Zacks Model Unveil?

Our proven model shows that McDonald’s is likely to beat earnings estimates in the second quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

McDonald’s ESP of +0.44% and a Zacks Rank #3 make us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

Here are a few other stocks from the Restaurant space that investors may consider as our model shows that they too have the right combination of elements to post an earnings beat in the upcoming releases:

The Habit Restaurants, Inc. has an Earnings ESP of +3.45% and a Zacks Rank #1. The company is scheduled to report second-quarter results on Jul 31.

BJ's Restaurants, Inc. (BJRI - Free Report) has a Zacks Rank #2 and an Earnings ESP of +1.97%. The company is scheduled to report second-quarter results on Jul 25.

Del Frisco's Restaurant Group, Inc. has an Earnings ESP of +100.00% and a Zacks Rank #2.

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