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McDonald's (MCD) Gears Up for Q4 Earnings: What's in Store?

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Zacks Equity Research
·3 min read
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McDonald's Corporation MCD is scheduled to report fourth-quarter 2020 results on Jan 28, before the opening bell. In the last reported quarter, the company reported a negative earnings surprise of 15%.

Q4 Estimates

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.76 per share. Notably, the company reported an earnings of $1.97 in the year-ago quarter. The consensus mark for revenues stands at $5.32 billion, suggesting a decline of 0.5% from the prior-year quarter.

Factors to Note

McDonald's fourth-quarter results are likely to reflect the impact of the coronavirus pandemic. Dismal store traffic might have weighed on the to-be-reported quarter’s performance. Moreover, dismal performance of international operated market is likely to have impacted the company’s fourth-quarter performance. Notably, the Zacks Consensus Estimate for international operated restaurants’ revenues stands at $2,724 million, indicating a decline of 5.6% from the prior-year quarter.

However, increase in revenues at franchise-operated restaurants might have benefited the to-be-reported quarter’s performance. Notably, the Zacks Consensus Estimate for revenues at franchise-operated restaurants stands at $2,992 million, indicating growth of 0.2% from the prior-year quarter.

Strong digitalization is likely to have favored performance in the quarter under review. The company has been focusing on drive-thru, delivery & take-away amid the coronavirus pandemic. Prior to the coronavirus outbreak, drive-thru accounted for about two-thirds of all sales in the United States. Drive-thru now accounts for approximately 90% of sales. To provide enhanced experience and convenience to customers, McDonald’s is increasingly focusing on delivery. The company provides delivery from more than 28,000 restaurants in above 75 countries.

What the Zacks Model Unveils

Our proven model predicts 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 chances of an earnings beat.

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

McDonald's has an Earnings ESP of +2.24% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

Here are some other stocks from the Restaurant space that investors may consider as our model shows that these too have the right combination of elements to post an earnings beat in the upcoming releases:

Brinker International, Inc. EAT currently has a Zacks Rank #3 and an Earnings ESP of +30.25%.

Yum! Brands, Inc. YUM has a Zacks Rank #2 and an Earnings ESP of +0.88%.

Papa John's International, Inc. PZZA has a Zacks Rank #3 and an Earnings ESP of +1.48%.

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McDonalds Corporation (MCD) : Free Stock Analysis Report
Brinker International, Inc. (EAT) : Free Stock Analysis Report
Papa Johns International, Inc. (PZZA) : Free Stock Analysis Report
Yum Brands, Inc. (YUM) : Free Stock Analysis Report
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