McDonald’s Revenue And Earnings To Beat Consensus?

by Trefis Team
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Market
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Trefis
MCD
McDonald's
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McDonald’s (NYSE: MCD) is slated to release its Q4 and full-year 2019 results on January 29, 2020. We believe that McDonald’s Revenues and earnings will beat consensus. We expect McDonald’s to report revenues of $21.1 billion (vs. consensus estimate of $21 billion), which would be 0.5% higher than the previous year. Earnings are likely to be around $7.99 (vs. consensus estimate of $7.85), higher than $7.54 reported in 2018, due to a higher net income margin. We believe that stronger-than-expected earnings and revenues for FY 2019 will likely result in a positive movement in McDonald’s stock price once earnings are announced. In fact, our forecast indicates that McDonald’s Valuation is $228 per share, which is roughly 7% more than the current price of around $212.

 

A] Revenue Expected To Beat Consensus

  • Total revenues have decreased from $24.6 billion in 2016 to $21 billion in 2018 primarily due to re-franchising.
  • Trefis estimates McDonald’s revenues to improve by 0.5% to $21.1 billion in 2019 from $21 billion in 2018.
  • Revenue improvement is expected to be driven primarily by the US Segment.

A separate interactive dashboard for McDonald’s provides an in-depth view of McDonald’s revenue trend and segment-wise revenue performance, along with forecast for 2019 and 2020.

B] EPS Expected To Beat Consensus

  • McDonald’s 2019 earnings per share (EPS) is expected to be $7.99 per Trefis analysis, higher than the consensus estimate of $7.85 per share.
  • A decrease in Total expenses along with slight increase in revenue and lower share count will drive the EPS improvement compared to 2018.
  • As we forecast McDonald’s Revenues to improve and Expenses to decrease in 2019 (0.5% vs -1.3%), this will result in a rise in McDonald’s Net Income Margin figure from 28.2% in 2018 to 29.5%.

C] Stock Price Estimate higher than Market Price

  • A trailing P/E multiple of 28.5x looks appropriate for McDonald’s stock, which is higher than the current implied P/E multiple of 27x.
  • As per Trefis, McDonald’s 2019 revenue and Earnings will be higher than the market expectations. This forecast works out to a fair value of $228 for McDonald’s stock, which is higher than its current market price of around $212.

Additionally, you can input your estimates for McDonald’s key metrics in our interactive dashboard for McDonald’s pre-earnings, and see how that will affect the company’s stock price.

 

 

See all Trefis Price Estimates and Download Trefis Data here

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