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Is McDonald’s Finally Able to Turn Around?



McDonald’s 3Q15 earnings

McDonald’s (MCD) released its 3Q15 earnings before the market opened on October 22, 2015, and reported EPS (earnings per share) of $1.40—a 28% rise from $1.09 in 3Q14. Analysts estimated that the company would report EPS of $1.27 for 3Q15. The market was surprised, and the company’s shares surged ~8% to $110.80 on the day’s closing. McDonald’s has returned 17% YTD (year-to-date). The First Trust Consumer Discretionary Alpha Fund (FXD) returned -1.3% over the same period.

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Critical quarter

  • For many investors, 3Q15 was the most critical and highly anticipated update.
  • Fixing McDonald’s struggling sales has been a challenge for three years.
  • McDonald’s is facing severe competition from several fast-casual players in the United States that are a complete opposite of McDonald’s food culture.
  • But before fixing its food, McDonald’s realized that it needed to clean its operation and reorganize its focus on key markets.
  • With that effect, the company appointed a new CEO, Steve Easterbrook, who announced a turnaround plan that was executed six months ago.
  • This would be the first full quarter since McDonald’s announced its turnaround plan, so this earnings report is a must-read to learn how things worked out for the company

Series overview

In this 3Q15 post-earnings series, we’ll discuss some of the key developments that took place during the quarter. We’ll look at one of the most important metrics: same-store sales growth. We’ll also discuss performance in key markets. Finally, we’ll look at some of the financial metrics and wrap up the series by looking at McDonald’s valuation multiple compared to peers such as Yum! Brands (YUM), Darden (DRI), and Starbucks (SBUX).


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