McDonald’s Corp. (MCD) reported disappointing results in the second quarter. The fast-food giant reported adjusted diluted earnings of $2.97 per share, a decline of 6% year-over-year, and fell short of Street expectations of $3.07 per share.
MCD’s Q2 Revenue Breakdown
MCD’s revenues remained flat in the second quarter at $6.5 billion, missing Street expectations of $6.6 billion. The fast-food chain’s comparable sales declined by 1% globally, falling short of analysts’ estimates of a 0.4% growth. This was the first decline in companywide same-store sales for McDonald’s since Q4 2020.
Internationally, same-store sales dropped 1.1% in markets like France and Germany and 1.3% in China and Japan. The company also faces boycotts in the Middle East and struggling sales in China.
In the U.S., same-store sales fell 0.7%, compared to a 10.3% increase last year. As consumers face rising inflation, they have cut back on fast-food spending, and foot traffic to U.S. locations has dropped. Furthermore, MCD is facing rising competition in a weaker consumer environment.
Interestingly, revenues from Franchised restaurants comprised more than 60% of MCD’s total revenues in the second quarter.
MCD’s $5 Meal Deal
In order to counter inflation, McDonald’s introduced a $5 meal deal in late June. The $5 meal includes a choice between a McDouble burger or McChicken sandwich, a four-piece chicken McNuggets, small fries, and a small soft drink.
The company stated on its earnings call that this meal deal is gaining traction and generating sales above its expectations. In addition, MCD’s management noted that 93% of its restaurants are willing to extend the $5 meal deal to attract more customers.
Is McDonald’s Stock a Buy or Sell?
Analysts remain cautiously optimistic about MCD stock, with a Moderate Buy consensus rating based on 19 Buys and eight Holds. Over the past year, MCD has declined by more than 10%, and the average MCD price target of $302.13 implies an upside potential of 20.6% from current levels. These analyst ratings are likely to change following MCD’s results today.
