- Shares hit new all-time high ahead of Q4 earnings
- EPS and revenues expected to fall around 1%
- Continued sales momentum and fewer headwinds
Fast food giant McDonald’s (MCD:NYSE) is due to report fourth-quarter results before the US market opens tomorrow (25 April) with earnings per share expected to increase 1% year-on-year to $2.34 on revenues down 1.4% to $5.59 billion according to Refinitiv data.
McDonald’s shares have been on a tear in recent weeks, closing at a new all-time high of $292.06 on Friday taking their year-to-date gain to 15%. The average 12-month broker price target of $305 suggests a further 5% upside.
EASING COST AND CURRENCY PRESSURES
Investors will be looking for signs of receding commodity and labour cost pressures, while foreign currency headwinds are also expected to reduce after the US dollar weakened by around 5% over the last year against a basket of currencies.
In a research note, Credit Suisse analyst Lauren Silberman said she expected sales momentum to continue: ‘McDonald's previously highlighted continued momentum across markets despite challenging consumer sentiment, and warm weather in Europe in the fourth quarter was likely a tailwind.’
Analysts will also be hoping to get an update on McDonald’s strategic plan - Accelerating the Arches 2.0 - which outlines its key growth pillars.
These include maximising marketing (brand and affordability), committing to core products (burgers, chicken, and coffee), and doubling down on the four D’s (delivery, digital, drive-thru and development).
In the fourth quarter the company generated record digital app downloads of 7.7 million according to Silberman, representing 40% year-on-year growth.
Goldman Sachs analyst Jared Garber commented: ‘We believe McDonald's will continue to offer value-oriented promotions in the 2023 financial year that will drive new loyalty program membership, and drive engagement and frequency for the brand to support its strong sales momentum as consumers seek the brand for value.’
