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McDonald’s Beats Analysts’ Q4 Estimates


Jan. 29 2020, Published 9:10 a.m. ET

Today, McDonald’s (NYSE:MCD) reported its earnings for the fourth quarter of 2019. For the quarter, the company reported revenue of $5.35 billion. The company’s revenue beat analysts’ estimate of $5.30 billion. McDonald’s adjusted EPS was $1.97 higher than analysts’ estimate of $1.96. Also, the company reported a strong SSSG of 5.9% compared to analysts’ forecast of 5.2%. Despite the impressive fourth-quarter performance, McDonald’s was trading in the red in the pre-market hours.

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McDonald’s revenue growth YoY

The company’s revenue increased by 3.6% YoY from $5.16 billion in the fourth quarter of 2018. McDonald’s revenue increased due to its global SSSG of 5.9% and the net addition of 974 franchised restaurants. However, some of the increased revenue was offset by the decline of 143 company-owned restaurants due to refranchising and unfavorable currency translation.

McDonald’s reported a global SSSG this quarter due to the strong performance across all of its segments. The company posted an SSSG of 5.1% in the US, 6.2% in international operated markets, and 6.6% in international developmental licensed markets. The company’s management said that its strong SSSG in the US was due to the impressive performance of its core products driven by promotions, deployment of EOTF (Experience of the Future), and an increase in menu prices. The impressive performance in the UK and France drove the international operated markets’ SSSG. Meanwhile, positive SSSG across all of the geographic regions in international developmental licensed markets drove its SSSG.

Fourth-quarter EPS

For the fourth quarter, McDonald’s reported a diluted EPS of $2.08. However, removing one-time items, the company’s adjusted EPS was  $1.97. The adjusted EPS was the same as the fourth quarter of 2018. During that period, the margins on company-owned restaurants improved from 17.5% to 17.9%. The margins on franchised restaurants fell from 81.7% to 81.1%. The company’s effective tax rate was 22.4% compared to 19.2% in the same quarter of the previous year. In 2019, the company repurchased 25 million shares for approximately $5.0 billion.

On January 23, McDonald’s board approved a quarterly dividend of $1.25 per share. The quarterly dividend represents an annualized payout of $5.0 per share. The company will pay dividends on March 16 to shareholders recorded as of March 2.

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2020 outlook

McDonald’s management expects to open 1,400 restaurants across the globe in 2020. They expect to open 400 company-owned restaurants at a cost of $800 million. Franchisees could open the remaining 1,000 restaurants. McDonald’s also plans to convert approximately 1,800 restaurants to EOTF at a cost of $650 million this year.

McDonald’s YTD stock performance

YTD, McDonald’s has returned 6.5% as of Tuesday. Meanwhile, Starbucks (NASDAQ:SBUX) and Shake Shack (NYSE:SHAK) have returned 0.8% and 13.1% during the same period, respectively. Wendy’s (NASDAQ:WEN) has lost 1.9% of its stock value during the same period.


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