24 Jan

Why Investors Are Optimistic about McDonald’s 4Q17 Earnings

WRITTEN BY Rajiv Nanjapla

Stock performance

McDonald’s (MCD) is scheduled to announce its 4Q17 earnings before the market opens on January 30, 2018. By the end of January 22, 2018, McDonald’s was trading at $176.10, which represents a rise of 7.9% since the announcement of its 3Q17 earnings on October 24, 2018.

Why Investors Are Optimistic about McDonald’s 4Q17 Earnings

In 3Q17, McDonald’s had outperformed the analysts’ SSSG (same-store sales growth) and revenue estimates. In January 2018, the company introduced its Dollar Menu, which features bargain items at three different prices.

To drive its SSSG, McDonald’s is also focusing on the implementation of digital advancements, the remodeling of restaurants to the EOTF (Experience of the Future), menu innovations, and the expansion of delivery service. All these factors, along with the enactment of tax reforms in the US, appear to have increased investor confidence, leading to a rise in the company’s stock price.

Year-to-date performance

Calendar 2017 was a good year for McDonald’s. Its stock price returned 41.4% last year, and YTD (year-to-date), the company’s stock price has already risen 2.4%.

By comparison, peer Wendy’s (WEN) has returned 1.6% since the beginning of 2018, while the stock prices of Jack in the Box (JACK) and Restaurant Brands International (QSR) have fallen 4.2% and 0.4%, respectively. The broader comparative indexes, the S&P 500 Index (SPX) and the SPDR Dow Jones Industrial Average ETF (DIA), have returned 6.0% and 5.9%, respectively.

Series overview

With McDonald’s 4Q17 earnings around the corner, we’ll look at the analysts’ estimated revenues, EBIT (earnings before interest and tax) margin, and EPS (earnings per share) in this short series. We’ll also look at the analysts’ estimates for the next four quarters and assess the company’s valuation multiple and analyst recommendations.

We’ll start by looking at the analysts’ 4Q17 revenue expectations.

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