What You Need to Know Before McDonald’s Earnings Announcement

UPDATE – July 26, 2024: This article has been updated to reflect more recent stock price information.

Key conclusions

McDonald’s is set to report its financial results on Monday morning. Analysts are predicting revenue growth but lower profits than in the same period last year.
Reports earlier this week indicated that McDonald’s cheap meals introduced last month were a success, and the company plans to extend the promotion.
Analysts recently said second-quarter earnings would likely continue to be impacted by inflation, but McDonald’s results could improve in the second half of the year.

McDonald’s will report financial results before markets open on Monday, amid reports that the fast food giant plans to extend a $5 meal promotion it launched last month through August.

Analysts are forecasting 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 expected to fall to $2.24 billion from $2.31 billion last year.

UBS analysts, who maintained a “buy” rating while cutting their price target for McDonald’s to $305 from $335, said second-quarter earnings could be pressured by inflation. However, the analysts said McDonald’s results could improve in the second half of the year as the chain’s focus on value draws customers back to stores.

	Analysts’ estimates for Q2 2024	Q1 2024	Q2 2023
Income	$6.63 billion	$6.17 billion	$6.5 billion
Diluted earnings per share	3.10 PLN	$2.66	$3.15
Net income	$2.24 billion	$1.93 billion	$2.31 billion

Key Metric: Like-for-Like Store Sales

Comparable-store sales have fallen in recent quarters for McDonald’s from double-digit gains last year. Executives have noted the impact of inflation on many customers. In the second quarter of 2023, McDonald’s reported 11.7% growth in comparable-store sales globally and just over 10% in the U.S.

Baird analysts said they are “growing more confident” that the company’s emphasis on value in its latest advertising efforts could improve consumers’ perceptions of the chain’s value, prompting them to return to McDonald’s locations.

“History shows that McDonald’s can gain significant market share by emphasizing value-oriented pricing and a sizable advertising budget,” analysts say.

Business in Focus: Expanding Meal Offerings with Value

After spending much of the first half of 2024 reckoning with the impact of inflation on sales as customers cut back on discretionary spending, McDonald’s and several other restaurants have introduced cheaper, good-value meals in hopes of winning back price-conscious customers,

Early indications seem to be positive as Bloomberg AND CNBC announced earlier this week that nearly all McDonald’s locations have agreed to extend the promotion beyond the original four-week schedule from its launch in late June.

The promotion is likely to last until August, as company executives are reportedly enthusiastic about the pace at which customers are returning to McDonald’s locations. Investors can expect confirmation of the promotion’s future on Monday.

McDonald’s shares have fallen about 15% since the beginning of the year and closed at $252 on Friday.