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Factors Setting the Tone for McDonald's (MCD) Q3 Earnings

Zacks Equity Research

McDonald's Corp. MCD is scheduled to report third-quarter 2019 financial numbers on Oct 22, before the opening bell. In the last reported quarter, the company’s missed the Zacks Consensus Estimate by a margin of 0.5%.

Which Way Are Estimates Moving?

The Zacks Consensus Estimate for third-quarter earnings is pegged at $2.21, higher than $2.1 reported in the year-ago quarter. Over the past seven days, the company’s earnings estimates have moved south by 0.5%. For quarterly revenues, the consensus mark stands at $5,486 million, suggesting growth of 2.2% from prior-year quarter’s reported figure.

Let’s delve deeper and analyze the factors likely to shape the company’s top and bottom lines.

Factors at Play

Sharp increase in franchise revenues is anticipated to get reflected in the company’s third-quarter top-line number. Notably, the Zacks Consensus Estimate for revenues at franchise-operated restaurants stands at $3,105 million, indicating an improvement of 8.6% from the prior-year reported number. However, the company-operated sales are expected to decline 4.1% to $2,407 million.

The company’s sales-building initiatives and increase in the global guest count are likely to have contributed to the company’s comparable sales (comps) in third-quarter 2019. Currently, Australia, Canada, France, Germany and Italy are all witnessing robust sales growth. In these markets, McDonald’s is driving comps through the introduction of value meals, customizing menu according to local customer tastes, reimaging of restaurants, efficient marketing and promotions, improved service and increased convenience via delivery.

McDonald's Corporation Price and EPS Surprise

 

McDonald's Corporation Price and EPS Surprise

McDonald's Corporation price-eps-surprise | McDonald's Corporation Quote

What Does the Zacks Model Say?

Our proven model does not conclusively predict an earnings beat for McDonald’s this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that's not the case here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although McDonald's has a Zacks Rank #3, its Earnings ESP of -1.53% makes surprise prediction difficult.

Stocks With Favorable Combination

Here are a few stocks from the Restaurant space you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat.

Shake Shack Inc. SHAK has an Earnings ESP of +11.86% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Papa John's International, Inc. PZZA has an Earnings ESP of +7.69% and a Zacks Rank #3.

Bloomin' Brands, Inc. BLMN has a Zacks Rank #3 and an Earnings ESP of +11.39%.

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McDonald's Corporation (MCD) : Free Stock Analysis Report
 
Papa John's International, Inc. (PZZA) : Free Stock Analysis Report
 
Bloomin' Brands, Inc. (BLMN) : Free Stock Analysis Report
 
Shake Shack, Inc. (SHAK) : Free Stock Analysis Report
 
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