Despite a challenging climate for restaurants with increased costs for the sector, McDonald’s beat Wall Street forecasts for earnings.
According to its quarterly report, McDonald’s made $2.55 per share on $5.72 billion in sales in the second quarter. Financial experts had forecast $2.47 in earnings per share on $5.8 billion in sales. Instead, earnings per share were $2.37, while sales were $5.89 billion, a decline from last year’s sales.
According to data compiled by FactSet, its 9.7 percent growth in global comparable sales for the quarter was higher than the 6.8 percent increase that analysts had predicted.
CEO Chris Kempczinski said, “The operating situation across the competitive landscape remains tough.” However, while preparing for different results, I am sure that McDonald’s has a more stable base than most competitors, thanks to our strategies and employees.
In early trading Tuesday, McDonald’s shares were up 0.6% at $251.75. McDonald’s stock price decline of 6.6% compares with a 16.0% decline in the S&P 500. The company is a haven among restaurant companies due to its size, scalability, and large dividend yield of 2.2%.
According to Cowen analyst Andrew Charles, earnings and same-store sales are “supportive,” rating the company as Outperform and setting a $275 price objective.
In the restaurant industry, many challenges have arisen in the past few years, and there is a possibility that more may arise in the coming months. The increase in consumer spending in recent months may have resulted from pent-up demand, but many people say they want to cut back on eating out with record inflation. Also, the cost of labor and supplies has risen, and a strong currency has hurt the ability of multinational chains to do business abroad.
However, industry leaders like McDonald’s do better than their competitors during recessions. Their size and financial resources allow them to increase marketing, weather promotional storms, and eventually win market share. Moreover, during economic downturns, fast food is often better than fine dining because of its reduced prices.
Investors will be looking at the results, calling for signs that McDonald’s is starting to see cooling wages or commodity prices and whether it believes demand will pick up throughout the second half of the year, all of which are necessary for McDonald’s to continue to outperform.
What McDonald’s has to say about earnings could shed light on the financial prospects of competing eateries. Many fast food chains, including Wendy’s, are scheduled to release earnings in the coming weeks. Last week, Domino’s Pizza reported disappointing financial results.