McDonald's results are better than feared, however they still miss the estimates 📊

The consumer's weakness can be seen in McDonald's results. The company reported a surprising decline in terms of comparable sales, and in terms of revenue generated by franchise restaurants, the company reported only 0.2% year-on-year growth, compared to 11% growth a year earlier.  

The U.S. fast-food giant reported a deterioration in its 2Q24 results. The company is currently facing a demand-side problem caused by a weakening consumer financial situation. In the U.S., lower-income earners, who make up the majority of the restaurant chain's customer base, are increasingly opting for cheaper substitutes in the form of preparing food at home with the prolongation of the Fed's restrictive policies and the ever-weakening purchasing power of their incomes. As a result, U.S. comparable sales fell 0.7% year-on-year, compared to a 10.3% increase a year earlier. 
Deteriorating dynamics can be seen in almost every major segment. Sales at company-operated restaurants fell more than 1% y/y (versus 18% growth a year earlier) to $2.46 billion. Sales at franchised restaurants rose only 0.2%, to $3.94 billion (vs. 12% growth last year). 

Deteriorating dynamics can be seen in almost every important segment. Sales at company-operated restaurants fell more than 1% year-on-year (vs. 18% growth a year earlier) to $2.46 billion. Sales at franchised restaurants rose only 0.2%, to $3.94 billion (vs. 12% growth last year). 

The situation is not improved by rising operating costs, which rose 5% year-on-year in the quarter (vs. a 15% year-on-year decline). Despite the increase in costs, this is still lower than those reported in 2Q22. Operating profit fell 6% y/y to $2.92 billion against this. 
At the diluted earnings per share level, the company reported an 11% decline to $2.8. 

Despite the results worse than analysts' predictions, it looks like the market expected the deterioration in data from the company to be even greater. Following the release of the results, McDonald's saw slight declines in pre-opening trade, while in the first hours of trading the company is up more than 4%. 

2Q24 FINANCIAL RESULTS:

• Comparable sales -1% vs. +11.7% y/y, est. +0.84% 
  • US comparable sales -0.7% vs. +10.3% y/y, est. +1.04% 
  • International operated markets comparable sales -1.1% vs. +11.9% y/y, est. +1.85% 
  • International developmental licensed markets comparable sales -1.3% vs. +14% y/y, est. -0.41% 
• Adjusted EPS $2.97, est. $3.07 
• EPS $2.80 vs. $3.15 y/y
• Revenue $6.49 billion, -0.1% y/y, est. $6.65 billion 
• Operating income $2.92 billion, -5.9% y/y

McDonald's is gaining after the release of results, approaching the resistance zone near $261. In the event of a sustained breakthrough of this level, the company's stock price could move closer to $264, the zone defined by the 100-session exponential moving average (EMA100). Source: xStation