McDonald’s will report its earnings before the market opens on Monday. This comes amid reports that the fast-food giant plans to extend its $5 value meal promotion, which began last month, into August.
Revenue And Income Expectations
Analysts predict McDonald’s revenue will slightly increase to $6.63 billion from $6.5 billion in the second quarter of 2023, according to Visible Alpha. However, net income is expected to decrease to $2.24 billion from $2.31 billion last year.
UBS analysts have maintained a “buy” rating for McDonald’s but lowered their price target from $335 to $305. They suggest that second-quarter earnings could be affected by inflation but believe performance may improve in the latter half of the year as the focus on value attracts more customers.
Comparable Store Sales
Comparable-store sales for McDonald’s have slowed recently, following double-digit increases last year. Executives have noted inflation’s impact on customers. In the second quarter of 2023, McDonald’s reported a global comparable sales growth of 11.7% and over 10% in the U.S.
Baird analysts express growing confidence that McDonald’s latest advertising efforts focusing on value could enhance the chain’s value perception among consumers, drawing them back to McDonald’s. They stated, “History suggests McDonald’s can gain significant market share by emphasizing value-oriented price points, supported by its substantial advertising budget.”
Value Meal Promotion
In response to inflation affecting sales and reduced customer spending, McDonald’s and other restaurants introduced lower-cost value meals in the first half of 2024 to attract budget-conscious customers.
Early reports from Bloomberg and CNBC indicate that nearly all McDonald’s locations have agreed to extend the promotion beyond the initial four-week period from its late-June start. The promotion is likely to continue into August, with company leadership reportedly pleased with the increased customer return rate. Investors will be looking for confirmation on the promotion’s future during Monday’s earnings report.
Stock Performance
McDonald’s shares have dropped about 15% since the start of the year, closing at $251.46 on Thursday.