Will McDonald’s 4Q16 Earnings Boost Its Stock Price?



Stock performance

Illinois-based hamburger giant McDonald’s (MCD) is scheduled to announce its 4Q16 results before the market opens on January 23, 2017.

In 3Q16, McDonald’s posted worldwide same-store sales growth (or SSSG) of 3.5%, compared with analysts’ estimate of 1.8%. It also outperformed analysts’ EPS (earnings per share) estimate of $1.48 by posting adjusted EPS of $1.62. The better-than-expected 3Q16 results, along with Donald Trump’s victory, appear to have increased investors’ confidence, boosting McDonald’s stock price. Investors expect Trump to loosen regulations, which could benefit restaurant chains.

As of January 12, 2017, McDonald’s was trading at $122.10, which represents an increase of 7.2% since the announcement of the company’s 3Q16 results on October 21, 2016.

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McDonald’s 2016 performance

In 2015, McDonald’s returned 26.7%. However, 2016 was a tough year for the company. McDonald’s returned 3.5%, while peers Jack in the Box (JACK), Wendy’s (WEN), and Restaurant Brands International (QSR) returned 48.7%, 26.7%, and 34.1%, respectively.

During the same period, the Consumer Discretionary Select Sector SPDR ETF (XLY), the broader comparative index, rose 6%. XLY has invested more than 9.5% of its holdings in restaurant companies, including McDonald’s (MCD), Starbucks (SBUX), and Yum! Brands (YUM).

Series overview

This pre-earnings release series will explore what we can expect from McDonald’s 4Q16 results. The series covers analysts’ estimates for revenue, EBIT (earnings before interest and tax) margins, and EPS. To wrap up this series, we’ll look at the company’s valuation multiple and expected stock price over the next 12 months. Let’s start by looking at McDonald’s estimated revenue for 4Q16.


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