McDonald's Corp. (MCD, Financial) will release its financial results for the third quarter before the New York Stock Exchange opens Oct. 24.
For the quarter, the average analyst estimates an EPS of $1.77. This is a mean of 30 estimates of analysts who were surveyed on McDonald’s third-quarter earnings and represents a 9.3% upside in earnings from a year ago.
Source: Yahoo Finance
Analysts’ estimates on earnings range between a low of $1.63 and a high of $2.01.
Third-quarter revenue of fiscal 2017 are expected to come in at $5.73 billion on average. This is a mean of 25 estimates of analysts who were surveyed.
Source: Yahoo Finance
These estimates – as you can see in the chart above – range between a low of $5.08 billion and a high of $6.38 billion.
On average analysts expect a 10.8% decline in the quarterly figure of revenue compared to one year ago when McDonald’s closed the third quarter of fiscal 2016 with revenue coming in at $6.42 billion.
For full fiscal 2017, analysts forecast a 14.9% year-over-year increase in the EPS item to $6.56 from full fiscal 2016 figure of $5.71 and backed on year-over-year declining revenue of $22.61 billion from year-ago sales of $24.62 billion.
For the full fiscal 2017 to full fiscal 2018 period, analysts expect that McDonald’s EPS will grow according to a 6.7% rate while revenue will decline according to an 11.60% rate.
For the following five years, analysts expect a 10.27% average growth in the yearly earnings of McDonald’s.
GuruFocus assigns McDoland’s a profitability and growth rating of 8 out of a total of 10.
As of the most recent quarter of 2017, McDonald’s has approximately $2.39 billion in cash on hand and securities or $2.95 per share considering the company has about 810 million shares outstanding, of which almost all are float.
A percentage of 0.10% of McDonald’s shares outstanding is held by insiders while a percentage of 70.15% is held by institutions. Among the top institutional holders, the Vanguard Group Inc., Blackrock Inc. and State Street Corp. stand out with 7.07% of McDonald’s shares outstanding, 6.74% and 5.12%, as of June 29.
Third-quarter results will also be the occasion to update McDonald’s investors on the company’s balance sheet figures. As of the second quarter, total current assets are valued $5.89 billion, which is nearly 18% of total assets’ value of about $32.79 billion, and total current liabilities are valued $2.74 billion. Values of total current assets and liabilities led to a current ratio of 2.15 versus an industry median of 1.16.
Total debt, including the short-term portion, was valued $28.36 billion. This figure was 81.5% of total liabilities as of June 30 and led to a total debt to equity ratio of -14.18.
GuruFocus gives McDonald’s a financial strength rating of 5 out of 10.
From its operations the company generated cash flow of $5.82 billion over the last 12 trailing months’ time frame, of which nearly 43% was used by McDonald’s for business growth purposes and to pay dividends to its shareholders according to a pay-out ratio of 60.82%.
McDoland’s distributes an annual dividend of $4.04 – through quarterly payments of $1.01 – to its shareholders for a dividend yield of 2.43% versus a current Standard & Poor's 500 dividend yield of 1.87%.
McDonald's has increased the annual dividend 41 times in a row. On Sept. 21 the board of directors authorized a 7% increase in the quarterly dividend to $1.01 per ordinary share from a previous distribution of 94 cents per share. The quarterly dividend of $1.01 per ordinary share will be paid by McDonald’s on Dec. 15 to its shareholders of record as of Dec. 1.
McDonald’s has an average target price of $173.42 and a recommendation rating of 2.1 out of 5.
According to the Peter Lynch chart, McDonald’s looks overvalued by the stock market as you can see in the chart below:
The company has a forward price-earnings (P/E) ratio of 23.70 that multiplied by a weighted (quarters) average EPS of $6.86 for fiscal years 2017 and 2018, yields to a value of $162.58 per share.
McDonald’s is currently trading at $166.30 per share with a market capitalization of $134.7 billion. The price to book value is negative, the P/E ratio is 27.22, and the price-sales (P/S) ratio is 5.57.
Disclosure: I have no positions in McDonald’s.
