3 Things to Watch For in McDonald's Earnings
McDonald's is set to report earnings on Wednesday. Here's what you need to watch for in the results.
The first question that tends to dominate in the moments after earnings come out is whether the company met the Street's expectations. For the fast-food king, that means booking at least $1.33 per share in profits on $6.89 billion of revenue. Hitting those figures would put McDonald's earnings growth at 0% for the quarter, with just a 1% rise in revenue.
But profits are hard to come by in the restaurant business these days. Cost inflation and price-sensitive customers means it's a tough environment all around. Just last week, Chipotle Mexican Grill had to roll back its quarterly earnings outlook after rising food costs negated most of the benefit from an uptick in customer traffic. We'll find out on Wednesday whether McDonald's profits were hit by the same trend.
Comparable sales growth
And all eyes will be on McDonald's comparable sales growth figures. The company has managed impressive growth over the past few years. Comps were up about 4% in 2009, 5% in 2010, and nearly 6% for 2011.
But growth has stalled over the past few quarters:
Comps in the U.S. region will be critical to watch, given that Mickey D's reported its first monthly sales decline in October. Sure, sales bounced back in November. But will December reestablish the growth trend? Investors want to know.
And, with sales in China slowing down dramatically for competitor Yum! Brands , I'll be watching closely to see how McDonald's holds up in its Asian market.
Finally, the brutal competition that's defined the industry lately shows no signs of easing up. Just this month, Yum! Brands rolled out a new value menu at its Taco Bell properties. And it's aimed directly at McDonald's successful dollar menu. McDonald's investors should get an important update on how management plans to meet challenges like these in the quarters ahead.
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The article 3 Things to Watch For in McDonald's Earnings originally appeared on Fool.com.Fool contributor Demitrios Kalogeropoulos owns shares of McDonald's. The Motley Fool recommends Chipotle Mexican Grill and McDonald's. The Motley Fool owns shares of Chipotle Mexican Grill and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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