McDonald's Corp. (MCD) plans to release third quarter results before the market opens on October 21, 2013 and will host an investor webcast afterwards.
Wall Street anticipates that Golden Arches will earn $1.51 for the quarter. iStock expects the Dow Jones Index member to miss Wall Street's consensus number. The iEstimate is $1.50, a penny downside surprise.
As you know, McDonald's is one of the most recognized brands in the world and operates nearly 35,000 McDonald's restaurants in 119 countries in North America, Europe, the Asia/Pacific, the Middle East, Africa, and Latin America. Its restaurants offer various food items, soft drinks, coffee, and other beverages, as well as breakfast menus.
That hamburger, fries and a Coke company struggled to meet the street's mark in the last year, falling short of the consensus three of the last four quarters.
While the iEstimate suggests the potential miss, US and European sales trends for July and August hint at the possibility of a better result. According to MCD management, United States sales were up 1.6% in July and 0.2% in August. Meanwhile, European sales popped higher by 3.3% in August following a 1.9% drop in July.
Unfortunately, the remaining regions dropped. In total, global comparable sales increased 0.7% in July and a healthier 1.9% in August. September comparable sales likely need to rival August in order to hit Wall Street's consensus Q3 revenue estimate of $7.34 billion. Otherwise, there is a reasonable chance sales could be light.
Recently, Goldman Sachs analyst Michael Kelter reported on the results of a survey of 2,000 consumers. Kelter says, "It [MCD] has not had strong innovation for the past few years, it is losing advertising share of voice and it is the restaurant consumers are least likely to recommend to their friends/family."
The latest innovation, Chicken Wings (which are tasty) may not be hot sellers. According to Mark Kalinowski, restaurant analyst at Janney Montgomery Scott, another surve! y found "Customer reaction is very positive, but if it doesn't have hot sauce then it is just a piece of chicken. It's running less than 2% of sales," and "Good product; too expensive for this economy."
One McDonald's owner said, "New product introductions don't seem to interest customers any more. Maybe we've overdone it. It seems we are wasting millions on advertising and getting nothing for it."
Our review of Q2's 10-Q did not reveal any real hike in costs – including advertising – relative to revenue; nothing in the latest financial statements sounded alarms.
Overall: McDonald's Corp. (MCD) is likely to hug Wall Street's revenue and earnings estimates, but we think odds favor a slight revenue miss and the iEstimate looks about right to us.
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