Will McDonald’s Stock See Mixed Q2 Results?

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Trefis
MCD: McDonald's logo
MCD
McDonald's

McDonald’s (NYSE: MCD) is scheduled to report its fiscal Q2 2021 results on Wednesday, July 28. We expect McDonald’s to beat the consensus estimates for revenues but miss for earnings. The company has reported better than expected revenues for three of the last four  quarters and earnings figures in two of the last four quarters. The company saw recovery in demand in the second half of 2020. We expect the growth to continue in the second-quarter FY2021 results.

Our forecast indicates that McDonald’s valuation is around $256 per share, which is 5% above the current market price of around $243. Look at our interactive dashboard analysis on McDonald’s pre-earnings: What To Expect in Q2? for more details. 

(1) Revenues expected to be ahead of consensus estimates in Q2

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Trefis estimates McDonald’s fiscal Q2 2021 revenues to be around $5.57 billion, above the $5.53 billion consensus estimate. McDonald’s Q1 2021 revenue grew by 9% to $5.1 billion as demand continued with the U.S. segment leading the growth. We expect the same momentum to continue in the second quarter of FY2021. Overall, we expect revenue of around $21.2 billion in FY2021. Our dashboard on McDonald’s revenues offers more details on the company’s segments.

(2) EPS likely to miss the consensus estimates

McDonald’s Q2 2021 earnings per share (EPS) is expected to be $1.80 per Trefis analysis, below the consensus estimate of $2.08. The company’s net income margin fell in 2020 due to higher operational expenses. The reopening of restaurants, reduction in lockdown curbs, and lower operational expenses are expected to improve the earnings in 2021. Altogether, the company is likely to report an EPS of around $7.48 in FY2021.

(3) Stock price estimate 5% above the current market price

Going by our McDonald’s valuation, with an EPS estimate of around $7.48 and a P/E multiple of 34.3x in fiscal 2021, this translates into a price of $256, which is 5% above the current market price of $243.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year

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