McDonald's (MCD) Disappoints in Q2, Shares Slump
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Price: $273.29 -1.11%
Rating Summary:
25 Buy, 23 Hold, 2 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 7 | Down: 20 | New: 25
Rating Summary:
25 Buy, 23 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 7 | Down: 20 | New: 25
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McDonald's (NYSE: MCD) second quarter results were the latest in a string of disappointments that has shares underperforming year-to-date.
The fast-food giant reported diluted earnings per share of $1.32, down 2 percent from last year, and below the Wall Street consensus of $1.38. Earnings per share were negatively impacted by $0.07 due to currency.
Consolidated revenues were flat from last year at $6.916 billion, which was a little shy of the $6.94 billion Wall Street consensus.
Global comparable sales increased 3.7 percent, versus the consensus a 2.9 percent rise. U.S. same store sales (SSS) increased 3.6 percent in the quarter, which was better than the 3.5 percent analysts were expecting. June U.S. SSS rose 2.9 percent, also better than the consensus of 2.8 percent. The Street is looking for 3.4 percent growth in U.S. SSS in July. In Europe, SSS rose 3.8 percent, better than the 2.4% consensus. In Asia, SSS was 0.8%, in-line with the consensus.
Operating margin in the quarter was 31.2 percent, down from 31.7 percent last year. This was the primary driver for the miss, according to analysts. Company restaurant margins were 18.2 percent, down from 19 percent last year. Franchise margins of 83.2% were in-line with the consensus.
Analysts at Goldman Sachs expect shares to sell-off on the results. "While June SS were better than expected (including in Europe), and the tepid July SSS guidance is not unexpected, margin pressures may persist given MCD's focus on value to drive sales in this environment." The firm maintained their Neutral rating and $92 price target on the stock, which they downgraded in June.
Deutsche Bank's analysts also sees shares lower, although they do see some bright spots in the quarter. "Overall, the EPS shortfall, combined with a recent bounce in the shares, is likely to lead to some modest pressure on the stock today," the firm said. "However, we found some encouraging signs in the release: (1) Global SSS finished the quarter in reasonably good shape, w/ June up 4.4% vs. DBe/consensus +2.9%/+2.1%. (2) Surprisingly, the upside in June was driven by Europe +(+5.1% vs. cons. expectations of +0.4%). (3) July SSS were guided to be “positive, but less than second quarter” (of +3.7%). This sounds generally consistent with expectations. Our forecast is +2.8% for July w/ consensus at ~+3%. (4) Europe restaurant margins were only down 30bps in 2Q, meaning MCD did not use aggressive promos to generate SSS growth."
Shares of McDonald's are down 2.5 percent to $89.34.
The fast-food giant reported diluted earnings per share of $1.32, down 2 percent from last year, and below the Wall Street consensus of $1.38. Earnings per share were negatively impacted by $0.07 due to currency.
Consolidated revenues were flat from last year at $6.916 billion, which was a little shy of the $6.94 billion Wall Street consensus.
Global comparable sales increased 3.7 percent, versus the consensus a 2.9 percent rise. U.S. same store sales (SSS) increased 3.6 percent in the quarter, which was better than the 3.5 percent analysts were expecting. June U.S. SSS rose 2.9 percent, also better than the consensus of 2.8 percent. The Street is looking for 3.4 percent growth in U.S. SSS in July. In Europe, SSS rose 3.8 percent, better than the 2.4% consensus. In Asia, SSS was 0.8%, in-line with the consensus.
Operating margin in the quarter was 31.2 percent, down from 31.7 percent last year. This was the primary driver for the miss, according to analysts. Company restaurant margins were 18.2 percent, down from 19 percent last year. Franchise margins of 83.2% were in-line with the consensus.
Analysts at Goldman Sachs expect shares to sell-off on the results. "While June SS were better than expected (including in Europe), and the tepid July SSS guidance is not unexpected, margin pressures may persist given MCD's focus on value to drive sales in this environment." The firm maintained their Neutral rating and $92 price target on the stock, which they downgraded in June.
Deutsche Bank's analysts also sees shares lower, although they do see some bright spots in the quarter. "Overall, the EPS shortfall, combined with a recent bounce in the shares, is likely to lead to some modest pressure on the stock today," the firm said. "However, we found some encouraging signs in the release: (1) Global SSS finished the quarter in reasonably good shape, w/ June up 4.4% vs. DBe/consensus +2.9%/+2.1%. (2) Surprisingly, the upside in June was driven by Europe +(+5.1% vs. cons. expectations of +0.4%). (3) July SSS were guided to be “positive, but less than second quarter” (of +3.7%). This sounds generally consistent with expectations. Our forecast is +2.8% for July w/ consensus at ~+3%. (4) Europe restaurant margins were only down 30bps in 2Q, meaning MCD did not use aggressive promos to generate SSS growth."
Shares of McDonald's are down 2.5 percent to $89.34.
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