Yahoo Finance McDonald’s sales grow, but not by enough
McDonalds (MCD), the highest-priced stock in the Dow Jones Industrial Average and widely held by retail and institutional investors, reported second quarter earnings on Tuesday.
Earnings per share beat estimates at $1.45, compared with expectations for $1.39 and $1.26 last year. ($1.45 adds back non-recurring items). Revenue came in inline.
Global same-store sales grew 3.1%, falling short of expectations for growth of 3.6%. The company’s key US market saw same-store sales growth of 1.8% versus expectations of 3.2%.
The majority of growth continues to come from pricing amid softening industry traffic growth. The “McPick 2 for $5” has been an important sales and margin driver, but the company continues to contend with what RBC’s David Palmer calls a “Dollar Menu hangover.”
Comparable sales for the International Lead segment increased 2.6% for the quarter, led by positive performance in the UK, Canada, Australia, and Germany. The multinational company, with 70% of revenue coming from outside the US, has provided a good read on consumer spending activity and also the impact of foreign currency changes.
Going into the quarter, shares of McDonald’s shares were up 8% year-to-date and 32% over the last year, driven from improved operating performance that kicked off with all-day breakfast. Despite a sell-off around the time of the Brexit vote, the company has still outperformed the S&P and the broader discretionary group (XLY).
Lapping all-day breakfast
McDonald’s has been boosted from its all-day breakfast launch, but the company is now lapping the roll-out. And with expectations high, investors are looking to see if McDonald’s has something else brewing.
Some analysts are concerned that coming quarters will be challenging for the company, as the brand laps the anniversary of the all-day breakfast launch on October 6, 2015.
Nomura downgraded the stock back on June 22, highlighting the difficulty the company could face going forward.
Restaurant group read
McDonald’s has been an important barometer for the restaurant group, which has been under pressure amid concerns of a consumer recession. But Barclays analyst Jeffrey Bernstein says that restaurants are more insulated from the brick & mortar to online debate.
McDonald’s has been focused on getting the value message just right.
