Shares of McDonald’s Corp. (MCD, Financial) traded approximately 2% lower on Tuesday on the company’s announcement that revenues for the second quarter plunged over 30% year over year on coronavirus-driven lockdowns.
For the quarter ending June 30, the Chicago-based fast-food chain reported net income of $483.8 million, or 65 cents in earnings per share, compared with net income of $1.517 billion, or $1.97 in earnings per share, in the prior-year quarter. Adjusted earnings of 66 cents per share underperformed the Refinitiv consensus estimate by 8 cents per share.
Coronavirus pandemic eats away 30% of revenues
McDonald’s reported consolidated revenues of $3.76 billion, down 30% from the prior-year quarter revenues of $5.41 billion but higher than the consensus estimate of $3.68 billion.
For the quarter, global comparable sales tumbled 23.9% year over year as countries around the globe enacted lockdowns to prevent the spread of Covid-19. Sales results were highly impacted in the company’s international markets due to temporary restaurant closures and limited operations.
Despite this, comparable sales improved month-to-month during the quarter as markets began reopening. Comparable sales declined 39% for April, 20.9% for May and 12.3% for June.
Chief Financial Officer Kevin Ozan said during the earnings call that markets with a high percentage of drive-through are showing quicker recovery while markets that depend on travel and tourism have slower recovery due to suppressed foot traffic and mobility. For example, comparable sales in Australia were positive in May and June driven by strong drive-thru performance. Additionally, drive-thru sales represented approximately 90% of total sales in the U.S.
Stock falls on revenue drop
Shares of McDonald’s traded at an intraday low of $195.50, down 2.85% from the previous close of $201.25. The stock decline contributed to the Dow Jones Industrial Average’s near-100-point slip at market open.
GuruFocus ranks McDonald’s’ profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7, a return on assets that outperforms 92.42% of global competitors and an operating margin that has increased approximately 9.1% per year on average over the past five years.
Gurus with large holdings in McDonald’s include Pioneer Investments (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, T Rowe Price Equity Income Fund (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio).
Disclosure: No positions.
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