Post Earnings Coverage as McDonalds Reports a Better than Expected Q3 Results

LONDON, UK / ACCESSWIRE / October 31, 2016 / Active Wall St. announces its post-earnings coverage on McDonald’s Corp. Earnings (NYSE: MCD). The company released its financial results for the third quarter fiscal 2016 (Q3 FY16) on October 21, 2016. The Oak Brook, Illinois-based company’s diluted earnings per share grew 7% y-o-y, thus outperforming market consensus estimates. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Reviewed

McDonald’s reported total revenue of $6.42 billion in Q3 FY16, which came in below $6.62 billion recorded in Q3 FY15. However, total revenue numbers topped Wall Street’s forecast of $6.28 billion. The company stated that quarterly performance reflected its sales-driven improvements made across all segments, led by results in the International Lead markets.

The global foodservice retailer’s net income came in at $1.28 billion, or $1.50 per diluted share, in Q3 FY16 from $1.31 billion, or $1.40 per diluted share, in Q3 FY15. The company’s net income also outperformed market expectations of $1.48 per diluted share. During the quarter, McDonald’s benefited from a stronger operating performance and higher gains on sales of restaurant businesses, partly offset by pre-tax restructuring and non-cash impairment charges amounting to $128 million.

The company’s diluted earnings per share, excluding the impact of current and prior year’s charges, increased 16% y-o-y, whereas diluted earnings per share growth was 17% y-o-y on constant currencies. Furthermore, foreign currency translation had a negative impact of $0.03 on the diluted earnings per share of the reported quarter.

McDonald’s President and Chief Executive Officer Steve Easterbrook said in the earnings release:

“Our third quarter results, including our fifth consecutive quarter of positive comparable sales across all segments as well as improved restaurant profitability, are a testament to the progress we are making to satisfy the needs of today’s dynamic customers.”

Operating-Metrics

In Q3 FY16, the company’s Global comparable sales improved 3.5%, reflecting positive comparable sales in all segments, meanwhile food-away-from-home inflation was about 2.5%. During the quarter, operating income improved 5% to $2.14 billion from $2.03 billion, in the year ago quarter. The company was able to reduce its total operating costs and expenses by 6% y-o-y during the quarter to $4.29 billion from $4.58 billion in the prior year’s quarter.

For quarter ended September 30, 2016, sales by company-operated restaurants came in at $3.97 billion compared to $4.28 billion in the last year’s quarter. Furthermore, revenues from franchised restaurants improved 5% y-o-y to $2.45 billion in the reported period from $2.33 billion in Q3 FY15.

Regional-Performance

In Q3 FY16, U.S. comparable sales were positive 1.3%. International Lead market segment comparable sales grew 3.3% y-o-y with positive growth from UK, Australia, Germany, and Canada, with the exception of France. In Q3 FY16, the company’s High Growth segment comparable sales improved 1.5% y-o-y with positive performance from Russia and most other markets, partially offset by negative comparable sales in China. Furthermore, comparable sales in Japan surged 17.7% y-o-y in the third quarter 2016 due to comprehensive turnaround plans to enhance modern restaurant experience.

The company’s operated margins grew to more than $730 million, representing an 11% rise on constant currencies basis. McDonald’s company-operated margins advanced 260 basis points as the U.S. and China markets lead overall improvement. Furthermore, company-operated margin percent grew 450 basis points, in the U.S., market 450 basis points in the reported quarter, primarily on positive comparable sales and a favorable commodity environment.

Dividend and Share Repurchase

In a separate press release on September 29, 2016, McDonald’s Board of Directors raised the quarterly cash dividend by 6% to $0.94 per share. The dividend will be paid on December 15, 2016 to all shareholders of record as of the close of business on December 1, 2016. Since, the company’s first dividend announcement in 1976, it has as raised its dividend each and every year and is the company’s 40th consecutive year of dividend hike.

During the quarter, the company returned $3.4 billion of cash to shareholders through share repurchases and dividends. The company has returned cash amounting to $27.8 billion till date against the targeted amount of $30 billion for the three-year period ending 2016.

Stock Performance

At the close of trading session on October 28, 2016, McDonald’s stock price was slightly up 0.02% to end the day at $112.10. A total volume of 3.3 million shares were exchanged during the session. The company’s share price has gained 2.61% in the past twelve month. The company’s shares are trading a PE ratio of 20.95 and have a dividend yield of 3.35%. The stock currently has a market cap of $96.18 billion.

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