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What Wall Street Expects from McDonald’s 1Q18 Earnings per Share

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Apr. 24 2018, Updated 12:25 p.m. ET

Analysts’ EPS expectations

Analysts expect McDonald’s (MCD) to post adjusted EPS (earnings per share) of $1.67, which represents growth of 13.7% from $1.47 in 1Q17. The EPS growth is expected to be driven by an expansion of the EBIT (earnings before interest and tax) margin, a lower effective tax rate, and share repurchases. However, some of the growth in EPS is expected to be offset by a fall in 1Q18 revenue.

Analysts are expecting McDonald’s EBIT margin at 41.0%, compared to 35.8% in 1Q17. The expansion is expected to be driven by growth in the franchise business and sales leverage from positive SSSG (same-store sales growth). However, some of the expansion is expected to be offset by an increase in SG&A (selling, general, and administrative) expenses due to an increase in technology-related spending. The company’s effective tax rate is expected to be 26.0% in 1Q18, compared to 32.8% in 1Q17.

From the beginning of 2Q17 to the end of 2017, the company repurchased shares worth $2.7 billion. Share repurchases boost the company’s EPS by lowering the number of shares outstanding.

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Peer comparisons and outlook

For 1Q18, Wendy’s (WEN), Jack in the Box (JACK), and Starbucks (SBUX) are expected to post EPS of 15.5%, -12.8%, and 17.7%, respectively.

For the next four quarters, analysts expect McDonald’s to post EPS of $7.57, which represents growth of 13.5% from $6.67 in the corresponding four quarters of the previous year.

Next in this series, we’ll look at McDonald’s valuation multiple.

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