McDonald's shares rose Tuesday after the third-quarter report was better than expected. He showed a strong performance in the international markets and higher spending per customer in the US
Here's what the company expects compared to what Wall Street reported, based on a survey by analysts from Refinitiv:
- Adjusted earnings: $ 2.10 cents per share, compared to $ 1.99 per share
- Revenues: $ 5.37bn vs. $ 5.32bn estimates
- Same-store sales: US growth grows 2.4%, according to StreetAccount
Yet both revenue and revenue are up Sales declined a year ago when McDonald's wants to renovate restaurants and add more upgrades like self-service kiosks. The company has also sought to improve its menu, including adding fresh beef hamburgers and new coffee drinks to bring more customers back to its restaurants. McDonald's has also partnered with Uber Eats to improve its delivery capability.
But these upgrades do not increase sales and earnings fast enough to satisfy some franchisees. A quarter of US restaurant operators met earlier this month and is considering joining forces to get more business support.
Sales to McDonald's sites undergoing these changes typically fell by 30 to 40 percent during the construction phase. David Palmer, an analyst at RBC Capital, told CNBC "Squawk on the Street" on Tuesday.
Palmer said that McDonald's overseas has already done many of these restaurant updates and digital initiatives and is paying off. Same-store sales in its major international markets – UK, Australia and France – rose 5.4 percent in the quarter, which was expected by 4.1 percent of analysts, according to StreetAccount.
McDonald's is renovating approximately 1,000 stores per quarter in the US and plans to spend approximately $ 1.6 billion domestically in 2018, with the majority of these funds accelerating the pace of these conversions.
At this rate, the company expects to have more than 12,000 restaurants by the end of 2019, CEO Steve Easterbrook said in a conference call on Tuesday.
"This is the largest construction project in our history," he said. "We still have a lot of work to do, but we see encouraging responses from customers in restaurants, where many of these improvements have already been completed, reflecting our experience in other McDonald's markets, such as Canada, the UK, and Italy, the programs Over a period of several years, they resembled the US.
In the third quarter release, Easterbrook continued to support the company's plans to revive the sale, which includes these renovations.
"We remain confident that our strategy will deliver long-term, profitable growth," he said in a statement.
Although McDonald's offers financial support to franchisees, they are struck by much of the burden.
"This is a price they are willing to pay As long as they see results in terms of better sales and profits, these benefits slow down and many start questioning the strategy," said Neil Saunders, executive director of Global Data Retail, in a statement.
Net income for the quarter decreased 13 percent to $ 1.64 billion, or $ 2.10 per share, compared to $ 1.88 billion or $ 2.32 per share a year ago , According to Refinitiv, this exceeded analysts' expectations of $ 1.99 per share.
The company said that foreign exchange rates have reduced earnings per share by 5 cents in the last period.
Sales decreased 7 percent to $ 5.37 billion. Same-store sales at McDonald's increased 4.2 percent quarter over quarter, compared to 3.6 percent from StreetAccount analysts.
Same-store sales in the US increased 2.4 percent This represents the 13th consecutive quarter of positive sales growth in the same business.
Higher menu prices, delivery and self ordering of newsstand orders contributed to a higher domestic domestic check, David Fairhust, executive vice president at McDonald's, said on the call. While revenue was positive, customer numbers in the US declined in the third quarter as competition increased with other value-offer restaurants.
"The changes McDonald's makes are, in our opinion, right and will pay off over time," said Saunders. "In fact, a failure would be catastrophic, but the challenge is to ensure that revenue growth accelerates faster and that the costs are moderated to offset the investment."
In a filing with the Securities and Exchange Commission, McDonald's said it now expects commodity prices to rise 2 percent, the upper end of its previous forecast.