McDonald’s Corporation (MCD) is expected to report second-quarter earnings on July 23rd, before market open. MCD has missed both Estimize and Wall Street consensus for the past 5 consecutive quarters as consumers and investors’ confidence shrinks. Estimize currently has 35 estimates for McDonalds, and is predicting an EPS figure of $1.25 compared to Wall Street’s $1.23 estimate, both up from $1.01 last quarter. Estimize and Wall Street also predict revenues to increase from a figure of $5.959B last quarter. The Estimize consensus is $6.503B, again higher than the Wall Street consensus of $6.454B. For the last three quarters, both EPS and revenue growth has been negative, with EPS down double-digits.
What to Watch:
- Sluggish comps: negative guest traffic in its major segments
- Food safety concerns in China (2014): Major deterrent to sales in Asia/Pacific, Middle East, & Africa.
- Stronger U.S. dollar: A multinational company located in over 100 countries
- Competition: Healthier options from the fast casual segment, such as Chipotle Mexican Grill, are enticing a more health conscientious consumer and stealing market share.The Positives:
- Menu innovation: The company has a successful value menu, recently extended beverage line, trimmed complicated menus, testing customized burgers & sandwiches, considering offering breakfast all-day items (tests of this in San Diego & Nashville have proved promising)
- Stronger marketing strategies: more limited-time offerings
- Faster service
- New digital strategy and mobile technologies to lower costs
- Increased franchising
- Lower general and administrative expenses
There’s no doubt that McDonald’s has been working hard to improve customer satisfaction and increase guest traffic, we’ll see tomorrow if those efforts have paid off.
(Photo Credit: Maryland Route 5)