Earnings Report Preview | From "1 Dollar Add-on" to Co-branding, Will McDonald's "Value Strategy" Stabilize Sales?
McDonald's will announce its first-quarter earnings before the US stock market opens on May 1, with expected revenue of $6.08 billion, a year-on-year decrease of 1.4%; earnings per share are expected to be $2.68, a year-on-year decrease of 1%. Analysts believe that recent promotional activities and menu innovations may drive sales, especially the collaboration with the "Minecraft" movie. Franchisees are optimistic about the outlook, believing that sales growth in April was significant, and McDonald's digital ecosystem and MyMcDonald's Rewards program also supported sales growth
According to Zhitong Finance APP, McDonald's (MCD.US) will announce its first-quarter financial report before the US stock market opens on May 1. Analysts expect the restaurant company's revenue to be $6.08 billion, a slight year-on-year decrease of 1.4%; the expected earnings per share is $2.68, a year-on-year decrease of 1%.
Due to a general cautious sentiment regarding consumers' discretionary spending, analysts' consensus expectations have slightly declined in recent weeks. Before the report is released, some analysts believe that McDonald's performance may exceed expectations, citing that recent promotional activities and menu innovations could have a potential impact on sales at the end of the quarter.
BTIG's recent franchise survey shows a significant improvement in McDonald's sales trends in the United States, with a substantial increase in sales in April, mainly due to the collaboration with the "Minecraft" movie. Franchisees have expressed renewed optimism about this year's prospects, citing the strong performance in April, an appealing menu lineup, and easier comparisons in the future. Analyst Peter Saleh noted that the "Minecraft" promotion brought additional foot traffic during dinner and family gatherings, and the collaborative collectibles sold out quickly.
The most important new menu item is the upcoming crispy chicken strips, returning after five years: this product mainly consists of all-white meat chicken strips coated in a crispy golden-brown breading, flavored with black pepper, available in several specifications and can be paired with various sauces. Other menu updates include the highly anticipated snack wraps, lemonade, and more. In January of this year, McDonald's also launched a new McValue menu in the United States, which includes a value promotion offering "one dollar plus one item" on popular foods (such as McChicken, Double Cheeseburger, McNuggets, and fries), along with ongoing $5 meal deals (McChicken or McChicken, four-piece nuggets, fries, and a drink).
McDonald's success is largely attributed to its strong digital ecosystem, particularly its MyMcDonald's Rewards program, which has 175 million active users across 60 markets. This platform not only drives sales but also provides valuable customer data for personalized marketing. McDonald's focus on digital innovation has enabled it to continue growing, especially as consumer behavior shifts online. Menu innovations and value products like the "$5 meal deals" also help drive foot traffic and address customers' affordability concerns.
Analysts expect McDonald's earnings per share for the full year to reach $12.25, a 4.5% increase from $11.72 in fiscal year 2024; they anticipate that by fiscal year 2026, its earnings per share will grow by 8.2% year-on-year to $13.25.
The general view among analysts regarding McDonald's stock is bullish, with an overall rating of "Moderate Buy." Among the 35 analysts tracking the stock, 20 have given a "Strong Buy" rating, 2 have given a "Moderate Buy" rating, and 13 have given a "Hold" rating. The average target price given to McDonald's by analysts is $330.94
