Can McDonald’s Continue to Outperform Analyst Estimates in 1Q17?
1Q17 earnings estimate
In 1Q17, McDonald’s (MCD) is expected to post EPS (earnings per share) of $1.33, which would represent a growth of 8.1% from $1.23 in 1Q16. This EPS growth is expected to be driven by share repurchases over the past 12 months and the expansion of its EBIT margin.
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Remember, share repurchases reduce the number of shares outstanding, thus boosting a company’s EPS. Since the beginning of 2Q16, MCD has repurchased shares worth $7.4 billion. However, the decline in revenue is expected to offset some of the EPS growth.
Peer comparisons and outlook
In 1Q17, analysts are expecting Jack in the Box (JACK) and Restaurant Brands International (QSR) to report EPS growth of 7.1% and 16.7%, respectively. However, analysts are expecting Wendy’s (WEN) EPS to fall 27.3% during the same period.
In 2017, analysts are expecting McDonald’s to post EPS of $6.16, which would represent a growth of 7.5% from $5.73 in 2016. Analysts are expecting the expansion of its EBIT margin and share repurchases to drive McDonald’s EPS in 2017.
On January 26, 2017, McDonald’s announced a dividend of $0.94, at a payout ratio of 61.3% and a dividend yield of ~2.8%. For next three-quarters of 2017, analysts are expecting the company to pay dividends of $0.94 to take the total to $3.76 for the year, which would represent a year-over-year growth of 5.6% over its total of $3.56 in 2016.
Next, we’ll look at McDonald’s valuation multiple.