McDonald’s (MCD) exceeds Q3 earnings expectations with the help of higher menu prices driving sales growth.
Global systemwide sales, which include both company-owned and franchised restaurants, rose by 11%. Same-store sales also saw a significant increase of 8.8%, surpassing analysts’ estimates of 7.79% according to Bloomberg consensus data.
Revenue jumped by 14% year-over-year, reaching $6.69 billion, surpassing estimates of $6.52 billion. Furthermore, adjusted earnings per share increased by 19% to 3.19.
In a press release, CEO and President Chris Kempczinski stated, “The macroeconomic environment is in line with our expectations, and we have continued to provide convenience and value to our customers.”
While McDonald’s shares have declined by nearly 3% year-to-date, they still outperform Restaurant Brands International (up nearly 2%) and YUM! Brands (down nearly 7%).
In the U.S., McDonald’s experienced growth in sales due to higher menu prices, new marketing campaigns, and the increasing popularity of digital and delivery orders. The company launched its innovative “As Featured In Meal” campaign in August, showcasing meals that have appeared in movies, TV shows, and films.
Although low-income consumers ($45,000 and under) reduced traffic compared to last year’s Q3, McDonald’s continues to attract middle and high-income consumers, gaining market share in these segments.
Baird analyst David Tarantino highlighted that McDonald’s typically benefits from increased foot traffic during times of economic uncertainty, making it one of the best-positioned brands to navigate challenging economic conditions.
In the financial crisis of 2008-2009, U.S. sales growth averaged 3.4%, and European sales growth averaged 6.9%, Tarantino noted.
The company also reported a surge in digital sales, reaching $9 billion across its major markets, accounting for 40% of total sales. This surpasses Q2’s digital sales of $8 billion.
Kempczinski emphasized McDonald’s significant scale in the digital sector, allowing for various opportunities that competitors find challenging to match.
The earnings rundown
McDonald’s Q3 results compared to Wall Street estimates, according to Bloomberg consensus data:
Revenue: $6.69 billion vs $6.52 billion expected
Adjusted EPS: $3.19 vs $2.98 expected
Same-store sales growth: 8.8% vs 7.79% expected
US sales growth: 8.1% vs 7.5% expected
International operated markets sales growth: 8.3% vs 8.51% expected
International developed licensed markets sales growth: 10.5% vs 8.27% expected
McDonald’s also incurred pre-tax charges of $26 million, or $0.02 per share, predominantly related to its restructuring plan involving undisclosed layoffs in April. The total annual charge for the year is estimated to be $224 million.
An investor update is scheduled on Dec. 6, during which McDonald’s will provide further details about its 2024 outlook. Kempczinski hinted at updates regarding its new “drive-thru only location” in Fort Worth, TX.
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