McDonald’s Corporation announced on October 22 that it logged a “strong performance” for the third quarter that ended on September 30, 2019. However, for the first time in two years the world’s biggest fast food chain fell short of Wall Street profit expectation. Its share price fell 5.04% to $199.27 on Tuesday.
Market watchers expressed mixed opinions about the results.
Andrew Charles of Cowen & Co. noted: “Our gut tells us that McDonald’s was outcompeted in the third quarter by Wendy’s and Burger King.”
Sara Senatore of Bernstein said sales “continue to be among the best in the industry.”
President and CEO Steve Easterbrook remained as positive as ever, commenting: “Broad-based momentum continued with our 17th consecutive quarter of global comparable sales growth. Globally, our customers are rewarding our commitment of running better restaurants and executing our velocity growth plan by visiting more often.”
While a number of rival QSR operators have expanded offerings on plant-based burgers in North America, McDonald’s continues to test the concept on a relatively small scale at units in Ontario, Canada.
“What we’re interested in is really how best to position this, get a sense of the flexitarian customer,” said Easterbrook.
Meanwhile, Q3 highlights posted by the Chicago, Illinois, USA-headquartered company were reported as follows :
- Solid global comparable sales of 5.9%, with the International Operated segment advancing 5.6%, the United States market up 4.8%, and the International Developmental Licensed segment gaining of 8.1%.
- Consolidated revenues rose $61.2 million or 1% (3% in constant currencies) to $5.4 billion.
- System wide sales advanced $1.3 billion or 5% (7% in constant currencies) to $26.0 billion.
- GAAP diluted earnings per share of $2.11 was relatively flat with the prior year (increased 2% in constant currencies).
- The company returned $2.4 billion to shareholders through share repurchases and dividends. This brought the cumulative return to shareholders to $22.5 billion against a targeted return of about $25 billion for the three-year period ending 2019. In addition, an 8% increase in the quarterly dividend to $1.25 per share was announced for Q3.
Results for the quarter and nine months in constant currencies reflected stronger operating performance, primarily due to an increase in sales-driven franchised margin dollars, partly offset by lower gains on sales of restaurant businesses, mostly in the USA.
Results for the nine months 2019 included $80 million of pre-tax strategic charges, or $0.07 per share, mainly related to impairment associated with the purchase of a joint venture partner’s interest in the India Delhi market, partly offset by gains on the sales of property at the former Corporate headquarters.
Results for 2018 reflected income tax costs associated with adjustments to the provisional amounts recorded in December 2017 under the Tax Act of $47 million, or $0.06 per share, for the quarter and $99 million, or $0.12 per share, for the nine months. Results for the nine months 2018 also included $94 million of pre-tax strategic restructuring charges, or $0.09 per share.
Excluding the above items, net income for the quarter decreased 4% (3% in constant currencies) and diluted earnings per share declined 2% (1% in constant currencies), and for the nine months net income decreased 4% (flat in constant currencies) and diluted earnings per share decreased 1% (increased 2% in constant currencies).
Foreign currency translation had a negative impact of $0.03 and $0.19 on diluted earnings per share for the quarter and nine months, respectively.
