By Senad Karaahmetovic
Shares of McDonald’s (NYSE:MCD) are slightly up in premarket trading Thursday after the fast-food giant reported better-than-expected Q2 EPS and U.S. same-store sales growth.
The company reported second-quarter adjusted EPS of $2.55, topping the consensus estimates of $2.47 per share. Net income in the quarter stood at $1.19 billion, or $1.60 per share, down from $2.22 billion, or $2.95 per share in the year-ago quarter.
Revenue came in at $5.72 billion, missing the consensus projection of $5.81 billion, and down 3% year-over-year.
MCD said global same-store sales grew by 9.7% in the quarter compared to the year-ago period, driven by robust international sales. The same-store sales numbers exclude Russian locations, though Ukrainian restaurants were included. The company reported a $1.2 billion charge associated with the sale of its Russian unit due to the invasion.
McDonald’s beat expectations for U.S. same-store sales, which grew 3.7% YoY, compared to the consensus projection of 2.8% growth.
Same-store sales in China came in weaker than expected due to reintroduced coronavirus lockdowns, but growth in Brazil and Japan, as well as growth in the international operated markets segment, helped offset China’s poor performance.
The company’s CEO Chris Kempczinski said the environment remains challenging as record-high inflation and the war in Ukraine continue to cause damage.
Vital Knowledge analysts said McDonald’s, as well as other sector peers that reported this week, delivered “solid” results fueled by “very robust pricing power and impressive cost controls”.
“Sentiment doesn’t love staples because people feel they’re expense and overbought/owned, but the industry continues to post very strong results,” analysts told clients in a note.
An analyst from Cowen said MCD is “executing well in a challenging global backdrop”.
“We find this [report] encouraging given investor concerns on the state of the U.S. & European lower-income consumer. While EPS flow-thru was restrained by Russia/Ukraine dynamics & higher SG&A, MCD represents an appealing defensive play that is executing,” he wrote in a client note.
A Goldman Sachs analyst expects MCD shares “will trade higher/lower today on the strong SSS momentum across MCD's segments, and overall margin/earnings performance, despite the top-line miss/noise due to Russia”.