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Will McDonald's Corporation's (NYSE:MCD) Earnings Grow Over The Next Year?

Simply Wall St

Since McDonald's Corporation (NYSE:MCD) released its earnings in June 2019, analysts seem fairly confident, with profits predicted to increase by 7.2% next year relative to the past 5-year average growth rate of 4.6%. By 2020, we can expect McDonald's’s bottom line to reach US$6.3b, a jump from the current trailing-twelve-month of US$5.9b. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

See our latest analysis for McDonald's

Exciting times ahead?

The longer term view from the 28 analysts covering MCD is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for MCD, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

NYSE:MCD Past and Future Earnings, September 10th 2019

From the current net income level of US$5.9b and the final forecast of US$7.1b by 2022, the annual rate of growth for MCD’s earnings is 5.9%. EPS reaches $9.79 in the final year of forecast compared to the current $7.61 EPS today. In 2022, MCD's profit margin will have expanded from 28% to 31%.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For McDonald's, I've put together three pertinent aspects you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

  2. Valuation: What is McDonald's worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether McDonald's is currently mispriced by the market.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of McDonald's? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.