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Earnings Preview: McDonald’s Latest Revenue Expectations

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Jan. 21 2015, Updated 9:32 a.m. ET

McDonald’s 4Q14 revenue expectations

McDonald’s (MCD) earns revenues from two sources—company-operated stores and franchised stores. About two-thirds of its revenues come from McDonald’s company-operated stores.

The majority of McDonald’s stores are franchises. It earns the remaining one-third of its revenues from these franchises in the form of royalties, rent, and fees.

 

There are two types of franchise—the developmental franchise and the conventional franchise. In a developmental franchise, the franchise is responsible for developing a specific region.

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Analyst expectations

Wall Street analysts estimate McDonald’s 4Q14 revenue will come in at $6,950 million. That’s a 1% sequential decline over 3Q14 revenues of $6,987 million and a 2% decline year-over-year, from revenues of $7,093 million. Lower sales estimates reflect the company’s challenges while it struggles to turn around declining same-store sales.

Competitors

Wall Street analysts estimate Yum! Brands (YUM), which operates KFC, Taco Bell, and Pizza Hut, will report revenues of $3,950 million when it releases its earnings report. KFC, Wendy’s (WEN), Burger King (BKW), and Popeyes (PLKI) are McDonald’s closest competitors in the US and cater primarily to lunch and dinner customers.

McDonald’s (MCD) entered the breakfast market eight years ago with its McCafe. Yum! Brands (YUM) also took a stab at this market when it introduced breakfast items at Taco Bell.

McDonald’s and YUM are part of the Consumer Discretionary Select Sector SPDR Fund (XLY).

Next, we’ll look at same-store sales expectations.

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