ii view: investors gobble up McDonald’s after Q4 results

Fourth-quarter results to 31 December

• Comparative global sales up 0.4%
• Revenue flat at $6.39 billion
• Adjusted earnings on a currency adjusted basis up 1% to $2.80 per share 
• Quarterly dividend of $1.77 per share, unchanged from previous quarter

Chief executive Chris Kempczinski said: “Accelerating the Arches continues to be the right strategy as we focus on growing market share.”

“We’re playing to win, focusing on our customers with outstanding value, exciting menu innovation and culturally relevant marketing.”

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ii round-up:

McDonald's Corp (NYSE:MCD) today reported better-than-expected sales, with growth at the international businesses more than countering a decline in its home US division. 

Fourth-quarter comparable sales rose 0.4%, beating Wall Street forecasts for a 0.9% decline. A return of customers to Middle East outlets following a customer boycott in the wake of the war in Gaza helped drive sales at the International Developmental division up 4.1%.

Shares in the Dow Jones company rose 4% having come into these latest results up almost 2% over the last year near to a record high. That’s behind a 14% gain for the Dow itself. Starbucks Corp (NASDAQ:SBUX) shares are up 15% over the last year. 

McDonald's operates in more than 43,000 locations in over 100 countries. Challenges in the Middle East during early 2024 were then followed by an E. coli outbreak for stores across some US States. 

A focus on meal deals and reduced takings more than countered increased customer footfall at the home business during the quarter, taking US comparable sales down 1.4%.

Comparative sales across the remaining International Markets division rose 0.1%, with gains for many markets hindered by lower UK sales.

Currency adjusted earnings gained 1% year-over-year to $2.80 per share. McDonald's previously declared a quarterly dividend of $1.77 per share, unchanged from the prior quarter.   

ii view:

Founded in 1955 and headquartered in Chicago, McDonald’s today sells burgers, fries, and many other fast-food items. Under its ‘Accelerating the Arches strategy’, McDonald’s is looking to build on areas including delivery, digital related sales and Drive-Thru. Competitors in its home US market include The Wendy's Co Class A (NASDAQ:WEN) and Shake Shack Inc Class A (NYSE:SHAK). The group’s customer loyalty programme operates in 60 markets with around 175 million users. 

For investors, the tough economic backdrop in markets such as the US and UK and including still elevated borrowing costs should not be overlooked. Operational challenges such as the recent e-coli outbreak in the US provide ongoing risk. Geopolitical tensions warrant consideration, with McDonald’s previously withdrawing from Russia following its invasion of Ukraine. Western tensions with China remain, intense competition across the industry is ongoing, while costs such as wages have risen. 

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On the upside, an easing in Middle East tensions does appear to have helped stores in the region return to normal. Expected full-year 2025 capital expenditure of over $3 billion is expected to include continued openings in China. Group initiatives, such as a customer loyalty programme are ongoing, while a record of raising the dividend payment annually since 1976 leaves the shares on a forecast dividend yield of around 2.3%.  

For now, and while some caution still looks sensible, this mammoth of the global fast-food sector appears to remain worthy of its place in many already diversified investor portfolios.  

Positives: 

• Defensive value product offering
• Progressive dividend policy

Negatives:

• Cost pressures
• Subject to currency fluctuations 

The average rating of stock market analysts:

Buy