McDonald’s earnings beat in Q2 and solid comparable sales grabbed investors’ attention on Tuesday. Happy with these performances, investors seem to have ignored the quarterly sales miss.
Foodservice retailer McDonald’s Corporation (NYSE: MCD) has delivered better-than-expected earnings in the second quarter of 2022. Earnings per share surpassed the consensus estimate by 3.2%. However, sales lagged expectations by 1.4%.
Despite the sales miss, upbeat earnings and healthy comparable sales seem to have lifted the market sentiments for MCD stock. Shares of this $185.2-billion fast food chain operator rose 2.6% to close at $257.09 on Tuesday.
Highlights of McDonald’s Q2 Results
In the quarter, the company’s adjusted earnings stood at $2.55 per share, above the consensus estimate of $2.47 per share. The bottom line grew 8% from the year-ago quarter. Forex woes had an adverse impact of 6% on the company’s earnings per share in the quarter.
Revenues were $5.72 billion in the quarter, below the consensus estimate of $5.8 billion. The top line declined 3% year-over-year. However, it was up 3% excluding the impact of forex woes.
McDonald’s global comparable sales increased 9.7% year-over-year in the second quarter. Comparable sales in the United States segment were up 3.7% on the back of an increase in menu prices and offerings.
Comparable sales in the International Operated Markets segment and International Developmental Licensed Markets & Corporate grew 13% and 16%, respectively.
The company’s President and CEO, Chris Kempczinski, said, “By focusing on our customers and crew, enabled by a rapidly growing digital capability, we delivered global comparable sales growth of nearly 10%.”
It is worth noting here that the company’s systemwide sales grew 4% year-over-year.
The adjusted operating income in the quarter was flat year-over-year, while advancing 7%, excluding the impact of forex woes. The operating results suffered due to cost inflation and loss of business in Russia and Ukraine.
Wall Street is Optimistic about McDonald’s
Analysts on TipRanks are unanimously optimistic about the growth prospects of McDonald’s and have a Strong Buy consensus rating based on 21 Buys and three Holds. MCD’s average price forecast is $280.38, reflecting 9.06% upside potential from the current level.
Following the results, Andrew Charles of Cowen & Co. reiterated a Buy rating on MCD while increasing the price target to $290 from $275 on the back of “MCD’s appealing defensive characteristics and high confidence in execution.”
McDonald’s Website Trend Hinted at Solid Digital Sales
According to TipRanks’ Website Traffic tool, the total estimated visits to MCD’s site surged 227.36% in the second quarter of 2022, compared with the year-ago quarter.
The increase in footfall on the company’s website hinted at solid digital sales in the second quarter. Revenues from digital channels were more than $6 billion in the top six markets served by McDonald’s.
Momentum Is Strong for McDonald’s
Despite the loss of business in Ukraine and Russia, forex woes, and costs inflation, McDonald’s pulled off impressive earnings performance in the second quarter of 2022. The company’s focus on providing value offerings to its customers, and its advancements on the digital front supported the outperformance. These tailwinds, along with the company’s solid footprint in the domestic and international markets, enhance Mcdonald’s investment appeal.