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McDonald's (MCD) Stock Up on Q3 Earnings & Revenues Beat

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McDonald's Corporation MCD reported third-quarter 2020 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. The bottom line beat the consensus estimate after missing the same in the trailing two quarters. Following the results, company’s shares are up 5% in pre-market trading session.    

Robust drive-thru presence and its investments in delivery and digital over the past few years have aided the company amid the ongoing crisis. All of the company’s restaurants remain opened throughout the quarter under review. However, resurgence in coronavirus cases has resulted in limited dine-in capacity and operating hours in most of the countries.

The company reported adjusted earnings of $2.22 per share, which beat the Zacks Consensus Estimate of $1.93. Moreover, the bottom line improved 5% year over year. Meanwhile, foreign currency translation had a negative impact of 3 cents per share on earnings in the quarter under review.

Revenues & Comps Discussion

In the third quarter, revenues of $5,418.1 million surpassed the Zacks Consensus Estimate of $5,365 million. However, the figure declined 2% year over year. This downtrend can primarily be attributed to the coronavirus pandemic. Moreover, on a constant-currency basis, the top line decreased 2% year over year.

At company-operated restaurants, revenues were $2,286.4 million, down 5% year over year. Moreover, the same at franchise-operated restaurants inched up 1% to $3,044.8 million.

In the quarter global comps declined 2.2%, against growth of 5.9% in the prior-year quarter. Comps declined for the third straight quarter after reporting positive comps in the trailing 19 quarters. In second-quarter 2020, comps were down 23.9%.

McDonalds Corporation Price, Consensus and EPS Surprise

McDonalds Corporation Price, Consensus and EPS Surprise
McDonalds Corporation Price, Consensus and EPS Surprise

McDonalds Corporation price-consensus-eps-surprise-chart | McDonalds Corporation Quote

Solid Comps Across Segments

U.S.: Comps at this segment rose 4.6% in the third quarter, compared with a gain of 4.8% in the prior-year quarter. The company’s comps in the quarter benefited from robust average check growth and strong performance at the dinner daypart.

International Operated Markets: Comps at this segment declined 4.4% year over year, against a gain of 5.6% in the year-ago quarter. Comps were hurt by dismal comps particularly in France, Spain, Germany and the U.K. However, the company witnessed positive comps in Australia during the quarter under review aided by drive-thru performance.
International Developmental Licensed Segment: The segment’s comparable sales decreased 10.1% in the third quarter. In the prior-year quarter, the segment’s comps had risen 5.9%. Comps were negatively impacted by dismal comps in Latin America and China, which was marginally offset by robust comps in Japan.

Other Financial Information

The company ended the quarter with cash and cash equivalent of $3,683.8 million, compared with $898.5 million at the end of Dec 312, 2019. As of Sep 30, 2020, long-term debt stood at $35,143.4 million, compared with $34,118.1 at the end of Dec 31, 2019.

Zacks Rank & Key Picks

McDonald's, which shares space with Yum! Brands, Inc. YUM, carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space include Brinker International, Inc. EAT and Fiesta Restaurant Group, Inc. FRGI. Brinker sports a Zacks Rank #1 (Strong Buy), while Fiesta Restaurant carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Brinker has a three-five-year earnings per share growth rate of 33.6%.

Fiesta Restaurant’s 2021 earnings are expected to surge 260.7%.

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McDonalds Corporation (MCD) : Free Stock Analysis Report
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Fiesta Restaurant Group, Inc. (FRGI) : Free Stock Analysis Report
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