:max_bytes(150000):strip_icc()/GettyImages-2159881840-e2e04c33a90644f9b7479e6e93e53199.jpg "What You Need To Know Ahead of McDonald’s Earnings")
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Key Takeaways
- McDonald’s is set to report earnings Monday morning, with analysts projecting improved revenue but lower profits than the same period last year.
- Reports earlier this week indicated that the value meal McDonald’s launched last month has been successful, with the company planning to extend the promotion.
- Analysts have said recently that second-quarter earnings will likely still be affected by inflation, but also that McDonald’s performance could improve in the second half.
McDonald’s reports earnings before markets open Monday amid reports that the fast food giant is planning to extend the $5 value meal promotion it launched last month into August.
Analysts expect McDonald’s revenue to rise slightly to $6.63 billion from $6.5 billion in the second quarter of 2023, according to estimates compiled by Visible Alpha, while net income is projected to fall to $2.24 billion from $2.31 billion last year.
UBS analysts, who maintained a “buy” rating while lowering their price target for McDonald’s to $305 from $335, said that second-quarter earnings could be pressured by inflation. However, the analysts said McDonald’s performance could improve in the second half of the year as the chain’s emphasis on value brings customers back into stores.
| Analyst Estimates for Q2 2024 | Q1 2024 | Q2 2023 | |
| Revenue | $6.63 billion | $6.17 billion | $6.5 billion |
| Diluted EPS | $3.10 | $2.66 | $3.15 |
| Net Income | $2.24 billion | $1.93 billion | $2.31 billion |
Key Metric: Comparable Store Sales
Comparable-store sales have slowed in recent quarters for McDonald’s from double-digit increases last year. Executives have noted the impact inflation has had on many customers. In the second quarter of 2023, McDonald’s reported 11.7% comparable sales growth globally, and just over 10% in the U.S.
Baird analysts said that they are “gaining confidence” that the company’s emphasis on value in its newest advertising efforts could improve the chain’s perception of value among consumers, bringing them back into McDonald’s locations.
“History would suggest McDonald’s can gain significant share when emphasizing value-oriented price points with its sizable advertising budget,” the analysts said.
Business Spotlight: Value Meal Extension
After spending much of the first half of 2024 acknowledging the impact inflation was having on sales as customers pulled back on discretionary spending, McDonald’s and several other restaurants have rolled out lower-cost value meals with the hopes of winning back price-conscious customers,
Early indications appear to be positive, as Bloomberg and CNBC reported earlier this week that nearly all McDonald’s locations have agreed to extend the promotion beyond the initial schedule of four weeks from its late-June start.
The promotion appears likely to extend into August as company leadership is reportedly enthusiastic about the rate at which customers are returning to McDonald’s locations. Investors could be looking for confirmation on the promotion’s future on Monday.
McDonald’s shares have fallen about 15% since the start of the year, at $251.46 as of Thursday’s close.