McDonald's (MCD) Q3 Earnings & Revenues Surpass Estimates

McDonald's Corporation MCD reported third-quarter 2022 results, with earnings and revenues beating the Zacks Consensus Estimate. However, the top and the bottom line declined on a year-over-year basis. Following the results, shares of the company rose 2.9% in the pre-market trading session.

McDonald's president and chief executive officer, Chris Kempczinski, stated, "Our third quarter 2022 performance demonstrated broad-based business momentum as global comparable sales increased nearly 10%. I remain confident in our Accelerating the Arches strategy as our teams around the world continue to execute at a high level."

Earnings & Revenue Discussion

During third-quarter 2022, McDonald's reported adjusted earnings per share (EPS) of $2.68, surpassing the Zacks Consensus Estimate of $2.57 by 4.3%. In the prior-year quarter, MCD reported an adjusted EPS of $2.86.

McDonald's Corporation Price, Consensus and EPS Surprise

McDonald's Corporation price-consensus-eps-surprise-chart | McDonald's Corporation Quote

Quarterly net revenues of $5,872.1 million beat the consensus mark of $5,711 million by 2.8%. The top line fell 5.3% year over year.

At company-operated restaurants, sales were $2,124.8 million, down 18% year over year. The same at franchise-operated restaurants was $3,671.2 million, up 5% year over year.

Comps Details

For the quarter under discussion, global comps increased 9.5% compared with a gain of 12.7% in the prior-year quarter.

Strong Comps Across Segments

U.S.: During the second quarter, comps at this segment rose 6.1% year over year, while a gain of 9.6% was reported in the prior-year period. This marks the ninth consecutive quarter of comps growth for the segment. McDonald’s’ comps for the quarter benefited from a menu price increase, positive guest counts and marketing initiatives.

International Operated Markets: Comps in this segment increased 8.5% year over year compared with a gain of 13.9% reported in the year-ago quarter. MCD gained from strong comparable sales in Germany, Australia and France.

International Developmental Licensed Segment: During the quarter, the segment’s comparable sales increased 16.7% year over year. In the prior-year quarter, its comps increased 16.7%. McDonald's gained from robust performance in Japan and Brazil. However, this was partially offset by negative comps in China due to COVID-19-related government restrictions.

Operating Highlights & Expenses

During the third quarter, McDonald’s total operating costs and expenses came in at $3,108.2 million, down 3.3% from the prior-year quarter’s levels.

During the quarter, operating income decreased 7% year over year to $2,763.9 million. Net income during the quarter totaled $1,981.6 million, down 8% from $2,149.9 million in the year-ago quarter.

Zacks Rank & Key Picks

McDonald's currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Retail – Restaurants industry are Potbelly Corporation PBPB, Chipotle Mexican Grill, Inc. CMG, Arcos Dorados Holdings Inc. ARCO.

Potbelly is currently Zacks #1 Ranked. PBPB has a trailing four-quarter earnings surprise of 22.2%, on average. Shares of PBPB have declined 20.6% in the past year.

The Zacks Consensus Estimate for Potbelly’s 2022 sales and EPS suggests growth of 17.9% and 101.9%, respectively, from the corresponding year-ago period’s levels.

Chipotle currently carries a Zacks Rank #2 (Buy). CMG has a trailing four-quarter earnings surprise of 4.1%, on average. The stock has declined 16.4% in the past year.

The Zacks Consensus Estimate for Chipotle’s 2022 sales and EPS suggests growth of 15.7% and 29.8%, respectively, from the corresponding year-ago period’s levels.

Arcos Dorados currently carries a Zacks Rank #2. ARCO has a trailing four-quarter earnings surprise of 102.6%, on average. Shares of ARCO have increased 52.6% in the past year.

The Zacks Consensus Estimate for Arcos Dorados’ 2023 sales and EPS suggests growth of 6.3% and 18%, respectively, from the comparable year-ago period’s levels.

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