Why Fourth Quarter Reports Will Disappoint Most Investors Following Steady Growth For 2016
After McDonald’s Corporation (NYSE:MCD) shares soared during the last month of 2016, reports from analysts now show that the upcoming fourth quarter earnings report to be released by the company on Monday might lead to a decline in the recent gains in the shares of the company. Prior to the earnings report, analysts estimates also showed that the report might show lesser same-store sales and a slowdown in the number of the fast food chain’s numbers.
According to a research conducted among the branch operators of the fast food chain, the colder weather proved to be a challenging condition for their sales as more competitors came up with ways to challenge their current dollar menu which cannot be discounted further.
A week before the release of the earnings report, forecasts for their franchise numbers and same-store sales dropped as the company faced the issues mentioned above. Meanwhile, overall earnings forecasts also declined with the forecasts dropping by 70 points and a weaker sales outlook for January still driven by the harsh weather conditions. Despite the challenges to be faced by the fast food chain, the company has come up with promotions for the winter including a dollar coffee which includes a special for less pricey hot beverages from Mcdonald’s. The brand’s coffee line currently generates around $4 billion in yearly sales for the company in the United states alone.
What To Expect From Q4 Results
Mcdonald’s previous quarter report showed that the company’s same-store sales jumped by 3.5% compared to the 1.8% growth during the second quarter and a 5.4% increase in the first quarter.
This time, collective analysts estimates show that Mcdonald’s might be posed for a decline led about by a decline in same-store sales and revenue to about 1.2%. Nomura-Instinet analysts Mark Kalinowski stated that he lowered is same-store sales expectations by 70 points with the fourth quarter consensus to be down by 1.4%.
For the EPS, Wall Street Analysts have issued an earnings estimate of about $1.41 per share this fourth quarter from the third quarter’s $1.5 earnings per share. Other estimates range to an EPS of $1.46.
Meanwhile, consensus revenue forecast is at around $5.99 billion less than 5.52% year over year while Wall Street estimates stand at $52 million, a 2.12% increase year over year. Total earnings for the whole year stands at a 14% rise year over year with a $5.69 EPS to a total of $24.59 billion revenue.
Majority estimates show that Mcdonald’s is set for a decline as Mcdonald’s is set to a 2.4% decline in the same-store sales in the U.S just in December and 1.4% during the year.
Should McDonald’s come out successful with their dollar coffee and big mac promotion which they have rolled out earlier in December, the company should have a positive first quarter for the year.
Stock Overview
Mcdonald’s opened on Friday higher at $122.68 before settling lower at $122.10. The stock then had a day’s low of $122.01 and a day’s high of 122.93.
For the quarter, the stock of the fast food chain has climbed by as much as 11 points since September while it traded above its 20-day moving average of 121.746 and above its 50-day moving average of 120.508.
Despite the weak outlook for the upcoming fourth quarter earnings report, analysts are expecting that there is a long-term growth for McDonald stocks with a $128.92 price target higher by 5.2% compared to last week’s close.