Restaurant chain McDonald’s Corp. (MCD, Financial) reported its third-quarter results before the opening bell on Oct. 24.
The Illinois-based company posted adjusted earnings per share of $1.76, narrowly missing estimates of $1.77. Revenue of $5.8 billion beat expectations of $5.7 billion but decreased 10% from the prior-year quarter due to charges related to its refranchising initiatives.
Same-store sales in the U.S. grew 4.1% due to the beverage and McPick 2 promotions, which was better than the anticipated 3.6% growth. Global comps rose 6% during the quarter.
Following the announcement, shares climbed more than 1% in premarket trading.
The trend in McDonald’s revenue growth over the past decade is illustrated in the graph below.
Despite the impact of Hurricanes Harvey and Irma, McDonald’s reported it was able to offset some of its losses through promotions. The fast-food chain’s national cold beverage promotion offered soft drinks for $1. Its McPick 2 deal offered a combination of two menu items for $5. In addition, the company offered its Signature Crafted sandwiches for between $5 and $7.
"We are serving more customers, more often by offering great-tasting food at a good value with the quick service and friendly hospitality they expect from McDonald's," President and CEO Steve Easterbrook said. "Our positive comparable sales and guest counts across all of our operating segments during the third quarter demonstrate broad-based momentum throughout our business that builds upon our strong first half of 2017."
Chief Financial Officer Kevin Ozan said the company completed its refranchising efforts in Hong Kong and China during the quarter, reaching its target of 4,000 refranchised restaurants “more than a year ahead of schedule.”
"Completing this transaction brings us closer to the customers and communities we serve in these markets and creates a better opportunity to unlock their full growth potential,” he said. “Our more heavily franchised structure will continue to drive shareholder value by providing a more stable revenue and income stream with higher returns on invested capital."
In addition to franchising, the company is focusing on innovating its menu, renovating stores, digital ordering and delivery to attract more customers and sustain growth.
During the quarter, McDonald’s returned $25.9 billion to shareholders through share buybacks and dividends. The company also announced a 7% increase in its quarterly dividend to $1.01, which will begin in the fourth quarter.
Among the 15 gurus invested in McDonald’s, Spiros Segalas (Trades, Portfolio) has the largest position with 0.33% of outstanding shares. Other top guru shareholders include Jim Simons (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Manning & Napier Advisors Inc. and Caxton Associates (Trades, Portfolio).
McDonald’s has a market cap of $132.3 billion; its shares were trading around $164.99 on Tuesday with a price-earnings (P/E) ratio of 26.78 and a price-sales (P/S) ratio of 5.61. According to GuruFocus data, the stock has gained 34% year to date.
Disclosure: I do not own any stocks mentioned.
