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Mayank Marwah
Mayank Marwah
Articles (993) 

What Investors Should Know About McDonald's Results

Company tops earnings and revenue estimates, but records a decline in global comps

November 09, 2020 | About:

McDonald's Corp. (NYSE:MCD) released its third-quarter results before the opening bell on Nov. 9.

The fast-food chain's earnings and revenue surpassed Wall Street's expectations as promotions lured customers into its restaurants.

The key numbers

The international hamburger chain registered adjusted earnings of $2.22 per share, up 5% from the prior-year quarter.Revenue stood at $5.42 billion, which reflected a decline from $5.50 billion last year. Analysts had forecasted earnings of $1.90 per share on $5.4 billion in revenue.

Global comparable store sales tumbled 2.2% in the reported quarter due to poor recovery in the international operated markets. However, the metric improved month-to-month throughout the quarter.

In a statement, Chief Financial Officer Kevin Ozan commented on the company's performance:

"The resilience of the McDonald's system was on display during the third quarter as the competitive strength of our business and the 3 D's – Digital, Delivery and Drive Thru – led to significant global comparable sales recovery. Our franchisees and restaurant teams around the world remain focused on running great restaurants and continuing to provide a safe environment for customers to enjoy our great tasting food."

Segment details

In the U.S., same-store sales surged 4.6% year over year in the third quarter and improved sequentially, positively impacted by a robust average check growth from larger group orders and strong dinner demand.While the guest count was down as a result of the Covid-19 pandemic, the average check was strong, especially at breakfast. Even though almost all the U.S. restaurants are open, they are being run at reduced capacity.

McDonald's recovery in the U.S. is faster than its competitor Burger King, which registered a decline of 3.2% in same-store sales. Wendy's (NASDAQ:WEN), however, did very well on the back of its nationwide breakfast launch. IT recorded growth of 7% in U.S. same-store sales in the third quarter.

Comps in the international operated division (including France, Spain, Italy and the U.K.) slipped 4.4% as sales were hampered by restaurant closures and limited operations. Comps improved sequentially throughout the quarter in all the markets. France, Spain, Germany and the U.K. recorded negative comparable sales. Australia, however, remained a bright spot, reporting positive comps growth thanks to robust drive-thru performance.

In the international developed licenced segment, comps declined roughly 10% due to negative comps growth in China and Latin America, which was partially offset by comps growth in Japan.

Restaurant updates and guidance

McDonald's is planning to shut down approximately 200 U.S. restaurants this year, of which more than half are the underperforming locations inside Walmart (WMT) stores. The company is looking forward to opening 300 net new U.S. restaurants in 2020. The company previously announced it would open 350 net new restaurants.

Worldwide, the company is projecting nearly 950 new restaurant openings this year, of which 270 will be new U.S. locations and the remainder be new locations in international markets.

The company did not provide 2020 guidance, citing the global uncertainty caused by the pandemic.

Disclosure: I do not hold any positions in the stocks mentioned.

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About the author:

Mayank Marwah
A seasoned writer with keen interest in the automotive, technology, telecommunication, retail and aerospace sectors.

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