McDonald's Climbs as Faster Global Growth Offsets U.S. Miss

(Bloomberg) -- McDonald’s Corp. climbed on Wednesday after reporting an acceleration in global sales in the fourth quarter, offsetting U.S. growth that was shy of estimates.

  • The company’s overall same-store sales rose 4.4 percent, topping the 4 percent average of analysts’ estimates, according to Consensus Metrix. In the U.S., the increase of 2.3 percent was just short of projections.

Key Insights

  • Sara Senatore, an analyst with Bernstein, said the results show the “resilience” of McDonald’s strategy. “While the U.S. was a bit softer, we think early signs of strength in the current quarter and management confidence in its plan are encouraging,” she wrote in a note to clients.
  • Even so, the slowing momentum in the U.S. will get a close look from the market. Despite pushing forward with delivery, digital orders and remodeling stores to a more modern look, the company said its customer traffic there was down in 2018.
  • McDonald’s, like many of its competitors, is being pulled in both directions price-wise. It’s keeping discounted items to draw in customers, but hiking prices elsewhere to maintain margins. This caused the average customer check to grow, tempering the decline in visits.
  • The company is betting big on store remodels in the U.S. to help lure in diners. McDonald’s made “substantial progress” on its store renovation program, Chief Executive Officer Steve Easterbrook said. The cost of the revamps, however, has created some tension with franchisees.
  • McDonald’s has topped earnings estimates in all but one quarter since 2015, and the company outpaced profit projections in the latest quarter as well. The streak may be difficult to maintain, however, in the face of wider economic issues: slowing economic growth in China and Europe and rising wage pressure and heightened competition in the U.S.
McDonald's Climbs as Faster Global Growth Offsets U.S. Miss

Market Reaction

  • The shares rose as much as 3.1 percent to $187.79 in New York, the biggest intraday gain in three months. Through Tuesday’s close, McDonald’s had already climbed 2.6 percent this year.
  • Get more information here.

©2019 Bloomberg L.P.