McDonald’s Corp. (NYSE: MCD) is scheduled to report its fourth-quarter financial results before the opening bell on Wednesday. Analysts are calling for $1.96 in earnings per share (EPS) and $5.3 billion in revenue. In the same period of last year, the burger giant said it had $1.97 in EPS and $5.16 billion in revenue.
Concerns surrounding growth for the Golden Arches surfaced when McDonald’s released its third-quarter report. At that time, same-store sales rose 5.9% but revenue rose only 1%.
Growth still remains a pertinent question for McDonald’s in a big picture sense. The company operates in a much different environment than it did a decade ago. It still has to compete with Burger King, Arby’s and Wendy’s, as well as an army of pizza chains led by Pizza Hut and Domino’s. Not to mention, chicken has become a growing trend in fast-food with Popeye’s and Chick-fil-A dominating this scene.
Delivery apps like Uber Eats, DoorDash and Seamless have provided more avenues for fast-food retailers to reach the public. With the advent of delivery, many would think that growth would explode from here, but by the numbers it looks like McDonald’s is late to the party.
Concerns about McDonald’s operations and restaurant sales in China have grown as the coronavirus has spread. Some restaurants have shut locations and eaters are staying home. McDonald’s has announced that it would close its locations in Wuhan and surrounding cities where transportation has been halted.
The coronavirus has appeared recently, and it’s likely that the effect on companies like McDonald’s will not be seen until the following quarter. While the stock might reflect the concern, we won’t have numbers until the company provides them or updates its guidance. We’ve already seen McDonald’s stock pull back from this news, but it’s hard to gauge how big the impact of the coronavirus actually will be going forward.
Excluding Tuesday’s move, McDonald’s stock has underperformed the broad markets, with a gain of only 14% in the past 52 weeks. In the past quarter alone, the shares were up only 7%.
A few analysts weighed in McDonald’s ahead of the report:
- KeyCorp has an Overweight rating and a $235 target.
- RBC has a Buy rating with a $218 target price.
- Wells Fargo rates it as Overweight with a $234 price target.
- Robert Baird’s Buy rating comes with a $218 target price.
- Morgan Stanley has an Overweight rating and a $230 target.
- Stephens has a Buy rating with a $225 price target.
Shares of McDonald’s traded up about 1% to $211.86 on Tuesday, in a 52-week range of $173.41 to $221.93. The consensus price target is $225.55.
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