McDonald's Expected to Flag 2Q Demand Softness

Dow Jones
08/04
 

McDonald's is scheduled to report its second-quarter financial results before the market opens on Tuesday. Here is what to know.

 

REVENUE: The fast-food chain is expected to report $7.13 billion in sales, compared with $6.84 billion in the prior-year quarter, according to FactSet.

 

NET PROFIT: The Chicago-based company is expected to post a profit of $2.38 billion, compared with a profit of $2.25 billion the year before, according to FactSet.

 

ADJUSTED EARNINGS PER SHARE: Adjusted earnings are expected to come in at $3.32 a share, compared with $3.19 a share the prior year.

 

The stock has fallen 12% this year, and recently traded at $268.24.

 

WHAT TO WATCH

--Analysts at UBS are expecting McDonald's second-quarter earnings will be pressured given what they believe is a difficult macroeconomic backdrop both in the U.S. and globally. Consumer demand in the U.S. has been soft and the UBS analysts expect same-store sales in the country to miss consensus estimates.

--Fast-food chains are also dealing with the cyclospora outbreak, which is threatening to deter customers. The outbreak prompted lettuce producer Taylor Farms to recall some of its produce. Taylor Farms sells its products directly to restaurants including McDonald's. Taco Bell recorded a 2% decline in same-store sales in its latest quarter and is introducing discounts to try to win back customers.

--McDonald's has doubled down on value meals and low-cost menu items this year in an effort to meet consumers' affordability demands. For several years, low-income customers have felt squeezed by inflation, resulting in less spending on dining out. In more recent months, the rising cost of gas is adding to the pressure on consumers' wallets.

 
 

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