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Why Is McDonald's (MCD) Up 7.6% Since Last Earnings Report?

A month has gone by since the last earnings report for McDonald's (MCD). Shares have added about 7.6% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is McDonald's due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

McDonald's Q3 Earnings & Revenue Beat Estimates

McDonald's reported third-quarter 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. Both metrics surpassed the consensus estimate for the fifth straight quarter and increased on a year-over-year basis.

During the quarter, MCD benefited from robust comparable sales.

Earnings & Revenue Discussion

During third-quarter 2023, McDonald's reported adjusted earnings per share (EPS) of $3.19, outpacing the Zacks Consensus Estimate of $3.00.  Adjusted earnings increased 16% from the prior year.

Quarterly net revenues of $6,692.2 million outpaced the consensus mark of $6,574 million. The top line rose 14% year over year.

At company-operated restaurants, sales were $2,556.2 million, up 20% year over year. Sales at franchise-operated restaurants amounted to $4,047.1 million and improved 10% year over year. Other revenues jumped 17% year over year to $88.9 million. Our model predicted sales by company-operated and franchise-operated restaurants to gain 9.6% and 6.6% year over year, respectively.

Comps Details

In the quarter under discussion, global comps expanded 8.8% compared with 9.5% in the prior-year quarter.

Strong Comps Across Segments

U.S.: During the third quarter, segmental comps rose 8.1% year over year compared with 6.1% a year ago. Comps benefited from a menu price increase, positive guest counts, marketing initiatives and robust digitalization.

International Operated Markets: Segmental comps extended 8.3% year over year compared with 8.5% in the year-ago quarter. Strong comparable sales in the Germany and the U.K. resulted in the uptick.

International Developmental Licensed Segment: Segmental comparable sales registered a 10.5% gain year over year compared with 16.7% in the prior-year quarter. McDonald's benefited from robust comps in all geographic locations.

Operating Highlights & Expenses

During the third quarter, McDonald’s total operating costs and expenses were $3,483.9 million, up 12% year over year.

Operating income rose 16% year over year to $3,208.3 million. Net income totaled $2,317.1 million, up 17% year over year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, McDonald's has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, McDonald's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

McDonald's belongs to the Zacks Retail - Restaurants industry. Another stock from the same industry, Chipotle Mexican Grill (CMG), has gained 13.6% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Chipotle reported revenues of $2.47 billion in the last reported quarter, representing a year-over-year change of +11.3%. EPS of $11.36 for the same period compares with $9.51 a year ago.

Chipotle is expected to post earnings of $9.60 per share for the current quarter, representing a year-over-year change of +15.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.3%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Chipotle. Also, the stock has a VGM Score of B.

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