After reporting healthy results in Q1 2017, McDonald’s ( MCD ) stock price is up by nearly 15% in the last three months. The company is likely to declare its Q2 2017 results on July 25th 2017 and the consensus revenue and EPS (earnings per share) estimates are as follows:
Source: Yahoo Finance
As the company moves towards a 95% franchised model, reduction in revenues but a consequent increase in earnings per share (better profitability due to higher margins) is expected. Further, the company’s ongoing share re-purchase program is contributing positively to its earnings per share.
As per data analyzed by BlackBox Intelligence, the restaurant industry has been “cautiously optimistic” in Q2 2017. While comp sales and traffic growth have remained negative throughout the quarter, June sales were best for the industry for both these metrics in the past six months.
Higher job and economic growth and moderating credit growth should help the restaurant industry going forward. Fine dining and upscale casual were the best performing restaurant segments in Q2 2017. Fast casual restaurants have been the weakest performing segment and the quick service segment is also struggling to grow. While McDonald’s falls in the weakest category, the company was able to go against the industry trend and report healthy results in Q1 2017. Its technology and menu innovation measures have worked in its favor in the past, yielding better results.
Menu Innovation And Technology Initiatives
- Mobile ordering platform : Most restaurant companies are looking at customer convenience as a key factor of growth. McDonald’s is likely to launch its mobile ordering platform this year and the company has already started experimenting with ordering kiosks at several of its stores. While competitors such as Burger King appear to be ahead in this initiative, we believe a delay on the part of McDonald’s might not make a significant difference. The company’s investment in technology can be a revenue driver going forward. (Read Here’s How Better Use Of Technology Can Drive Sales For McDonald’s).
- Natural, Gourmet, Healthier Food : McDonald’s is transforming itself from a “junk food” destination to a healthy food restaurant which also serves “gourmet” options. These initiatives can move it from the quick service to the fast casual dining category, driving sales in the long term. (Read Can Focus On Gourmet Food Drive Revenues For McDonald’s ?)
McDonald’s’ transformation appears to be helping the company and it performed much better than competitors in the last quarter. As the company continues to work on its menu innovation and technology measures, we will be watching if it is able to deliver another stellar quarter this year.
For more details on the company refer to our complete analysis of McDonald’s.
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