McDonald’s (MCD) posted its 4Q17 earnings before the market opened on January 30. The company posted adjusted EPS (earnings per share) of $1.71 on revenues of $5.34 billion. Compared to 4Q16, the company’s EPS grew 18.8% while revenue declined 11.4%.
Analysts were expecting McDonald’s to post adjusted EPS of $1.59 on revenue of $5.23 billion. Also, the company outperformed analysts’ systemwide SSSG (same-store sales growth) estimate of 4.9%, posting 5.5%. Despite posting strong 4Q17 earnings, the company’s stock price declined due to fears of more customers trading down to cheaper menu options with the introduction of a new $1 $2 $3 Dollar Menu on January 1. By the end of January 30, McDonald’s was trading at $172.48, which represents a fall of 3.0% from its previous day’s closing price.
2017 was a good year for McDonald’s. Its stock price returned 41.4%. Since the beginning of 2018, the company’s stock price has increased 0.2%. Peers Wendy’s (WEN), Jack in the Box (JACK), and Starbucks (SBUX) declined 2.4%, 6.3%, and 0.4%, respectively. However, the broader comparative indices, the S&P 500 Index (SPX) and the Consumer Discretionary Select Sector SPDR Fund (XLY), have returned 5.6% and 9.6% year-to-date, respectively.
In this series, we’ll analyze McDonald’s 4Q17 performance by comparing it with analysts’ estimates. We’ll also cover analysts’ estimates for the next four quarters. Finally, we’ll end this series by looking at the company’s valuation multiple and analysts’ recommendations for McDonald’s.
Let’s start our analysis by looking at McDonald’s 4Q17 revenue.