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McDonald’s Stock Rose on Strong Q2 Same-Store Sales

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Jul. 26 2019, Published 1:32 p.m. ET

McDonald’s stock performance

On Friday, McDonald’s (MCD) reported its second-quarter earnings. For the quarter ending on June 30, the company posted an adjusted EPS of $2.05—in line with analysts’ expectations. However, the company outperformed analysts’ SSSG (same-store sales growth) and revenue estimates. McDonald’s reposted an impressive global SSSG of 6.5%—compared to analysts’ expectation of 5.1%. The company’s revenues were $5.34 billion—marginally higher than analysts’ estimate of $5.33 billion. Notably, the strong second-quarter sales caused McDonald’s stock to rise. As a result, the company was trading close to a 1% high in early morning trade.

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McDonald’s second-quarter revenues

McDonald’s revenue growth was flat year-over-year. However, excluding unfavorable currency translation, the company’s revenues rose 3.0%. The growth in same-store sales and the net addition of new restaurants drove the company’s revenues. However, refranchising company-owned restaurants offset some of the increased revenues.

McDonald’s reported an SSSG of 5.7% in the US, which beat analysts’ expectation of 4.5%. The company’s management credited the success of its national and local deal offerings, its “Experience of the Future” deployment, and stronger core menu items for its SSSG.

The International Operated segment reported an SSSG of 6.6%. The strong performance from the United Kingdom, France, and Germany drove the segment’s SSSG. The strong performance in all of the geographic regions drove the International Developmental Licensed segment’s SSSG. The segment reported an SSSG of 7.9%.

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McDonald’s EPS growth

For the second quarter, McDonald’s reported a diluted EPS of $1.97. However, removing one-time or special items, the company’s adjusted EPS was $2.05. The company’s revenue rose 3.0% YoY. The lower effective tax rate and share repurchases dove the company’s EPS. However, increased interest expenses offset some of the gains in the company’s EPS.

In the last four quarters, McDonald’s repurchased 22.2 million shares for $3.96 billion. The repurchases lowered the weighted average number of shares outstanding to 768.7 million from 787.1 million in the second quarter of 2018. For the second quarter, the company’s effective tax rate was 24.5%—compared to 25.9% in the second quarter of 2018.

McDonald’s stock performance

By the end of Thursday, McDonald’s was trading at $214.44. The company has returned 20.8% YTD (year-to-date). McDonald’s has outperformed the broader equity market. During the same period, the S&P 500 Index rose 19.8%. In comparison, Starbucks and Dunkin’ Brands have returned 41.3% and 26.7% YTD, respectively.

On Tuesday, Chipotle reported better-than-expected second-quarter earnings. To learn more, read Chipotle Stock Rose Due to Impressive Q2 Performance.

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