McDonald’s appears unstoppable ahead of its latest earnings

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It seems like a few things could stand in McDonald’s way.

Wall Street expects further growth ahead of the company’s latest quarterly results on February 5. This comes as tightening portfolios, rising costs and concerns about the impact of weight-loss drugs weighed on fast food stocks last year.

But business at the Big Mac maker continues to progress, as consumers remain hungry for the value meal. Adjusted earnings per share are expected to jump 7% to $2.82, while revenue is expected to grow 9% to $6.5 billion. Until the A storm of GLP-1s It seems to pass.

In December, McDonald’s CEO Chris Kempczinski told Yahoo Finance: “We don’t see any impact today with GLP-1s and…no one has any idea what the impact will be in the future.”

Analysts are optimistic that McDonald’s can move forward with almost anything.

“It’s hard to see McDonald’s not winning in any consumer environment,” Wedbush analyst Nick Setian wrote in a note to clients. He expects sustained same-store sales growth in the near term, driven by menu pricing, innovation, loyalty programs, marketing effectiveness, operational execution and efficiency.

Jefferies’ Andy Parish called the stock a top pick in 2024, calling it “the best defensive and offensive play in restaurants,” with “resilience to an uncertain or weak macroeconomic situation.” [environment]Parrish expects the chain to invest more in digital products, delivery services, drive-thru orders, and chicken products.

McDonald’s stock has risen 7% in the past year, underperforming the S&P 500’s gain of 20%.

As employees gradually return to their offices, the chain also appears to be regaining the number of breakfast diners. for every Placer.ai16.7% of store visits in 2023 occurred between 7 a.m. and 10 a.m. ET, up from 15.9% in 2022, though still lower than 2019 when 18% of visits occurred during those hours.

Citi analyst John Tower expects breakfast challenges facing the entire industry, but described McDonald’s digital efforts and sheer scale as a “key advantage.”

“McDonald’s has done a great job, particularly in the last three years, growing its mobile ordering and loyalty program in the U.S.,” Tower told Yahoo Finance Live.

Towers added that higher usage of the app will allow for better data collection, enabling McDonald’s to gain more information about customers and their behaviours.

In Q3, system-wide digital sales — which include sales made on the app, delivery or on kiosks — totaled $9 billion across its six largest markets, making up 40% of total sales. This is a jump from the second quarter, which saw $8 billion in digital sales.

Another growth spurt may be coming, as McDonald’s aims to expand from 41,000 to 50,000 restaurants by 2027. This will “better accommodate the increasing demand that McDonald’s is seeing around the world,” Parrish said.

Although there are “some ongoing concerns regarding the profitability of quick-service restaurant franchisees,” Parrish expects these issues to subside. He added that upcoming interest rate cuts could help investors “better appreciate” the growth plan.

In addition, it may soon acquire another franchise—CosMc.

The drive-thru-only concept, which is about 2,800 square feet compared to a typical restaurant’s 4,000 to 4,500 square feet, aims to solve the 3pm slump with customizable drinks, along with sweets and savory.

McDonald’s opened its first location in Bolingbrook, Illinois, on December 7, with plans to launch nine more locations in Texas this year.

Lines form outside McDonald’s new drinks-only restaurant chain, CosMc’s, during the secret opening of the concept in Bolingbrook, US on December 7, 2023. REUTERS/Eric Cox (Reuters/Reuters)

So far, the beta site seems to be showing results.

Based on preliminary data from Placer.aiCosMc saw “more than twice as many visits as a typical McDonald’s chainwide restaurant during December 2023…and more than three times as many visits per square foot,” wrote RJ Hottovy, head of analytical research at Placer.ai.

He suspects the numbers would have been “much higher” if the concept had additional capacity to “meet the massive demand”.

Its audience also tends to skew younger, with the largest audience being 18 to 34 years old – another win for the Golden Arches.

Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter at @Brooke De Palma Or email her at bdipalma@yahoofinance.com.

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