McDonald’s Q4 Earnings: Investors Are Optimistic



Stock performance

McDonald’s (MCD) is scheduled to post its fourth-quarter earnings before the market opens on January 30. As of January 22, the company was trading at $184.57, which represents a rise of 10.8% since the announcement of its third-quarter earnings on October 23. McDonald’s is trading at a premium of 25.7% from its 52-week low of $146.84 and at a 3.3% discount from its 52-week high of $190.88.

In the third quarter, the company posted an adjusted EPS of $2.10 on revenues of $5.37 billion. McDonald’s outperformed analysts’ EPS expectation of $1.99 and revenue expectation of $5.32 billion. The company also beat analysts’ SSSG (same-store sales growth) estimate of 3.6% by posting an SSSG of 4.2% during the quarter. Along with the strong third-quarter performance, investors’ optimism surrounding McDonald’s initiative to modernize its restaurants, which includes implementing self-order kiosks, remodeling its restaurants, and expanding its deployment of the “Experience of the Future” initiative, increased investors’ confidence. As a result, the company’s stock price increased.

On November 29, Morgan Stanley upgraded McDonald’s stock from “equal weight” to “overweight.” The company’s stock price hit a new 52-week high of $190.88 on November 29.

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YTD performance

Last year, McDonald’s stock returned 3.2%. However, the company has started 2019 on a strong note by returning 3.9% YTD (year-to-date). In comparison, Starbucks (SBUX), Wendy’s (WEN), and Jack in the Box (JACK) have returned 1.5%, 7.0%, and 3.4%, YTD, respectively. The broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), which invests 8.1% of its holdings in restaurant and travel companies, has returned 6.3% during the same period.

Series overview

With McDonald’s fourth-quarter earnings around the corner, we’ll discuss analysts’ revenue and EPS expectations for the quarter. We’ll also discuss analysts’ recommendations and McDonald’s valuation multiple. In the next part, we’ll discuss analysts’ revenue expectations for the fourth quarter.


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