Earnings Release Is MacDonald A Buy?

 

 

McDonald  (NYSE:MCD) the fast-food giant reported fiscal first-quarter net income of $1.54 billion, or $2.05 per share, up from $1.11 billion, or $1.47 per share, a year earlier. Excluding items, McDonald’s earned $1.92 per share, topping the $1.81 per share expected by analysts

 

• 2021 global comparable sales and revenues for the quarter surpassed first quarter 2019 levels, driven by the U.S.

• Global comparable sales increased 7.5% in the first quarter, with growth across all segments

• Diluted earnings per share of $2.05 increased 39%; excluding strategic gains, diluted earnings per share of $1.92 increased 31%

 

McDonald’s Corporation today announced results for the first quarter ended March 31, 2021.

 

“Our first quarter 2021 global comparable sales and revenues surpassed first quarter 2019 levels, even as resurgences and operating restrictions persist in many parts of the world. I continue to be inspired by the resilience of our crew members, franchisees, suppliers, and company employees as we lead with our values and stay true to our purpose of feeding and fostering communities,” said McDonald’s President and Chief Executive Officer Chris Kempczinski. “Our teams around the world are focused on executing our Accelerating the Arches strategy at the highest level – we’re maximizing our marketing in a culturally relevant way, committed to the great tasting customer favorites on our core menu and doubling-down on digital, delivery and drive thru to create a faster and easier customer experience.”

 

First quarter financial performance:

• Global comparable sales increased 7.5%, reflecting positive comparable sales across all segments: 13.6% in the U.S.; 0.6% in the International Operated segment; and 6.4% in the International Developmental Licensed segment.

• Consolidated revenues increased 9% (5% in constant currencies).

• Systemwide sales increased 12% (8% in constant currencies).

• Consolidated operating income increased 35% (30% in constant currencies) and included $135 million of strategic gains primarily related to the sale of McDonald’s Japan stock. Excluding these gains, operating income increased 27% (22% in constant currencies).

• Diluted earnings per share of $2.05 increased 39% (35% in constant currencies). Excluding $0.13 per share of strategic gains, diluted earnings per share was $1.92 for the quarter, an increase of 31% (27% in constant currencies).

COMPARABLE SALES

Increase/(Decrease) Quarters Ended March 31,

• Comparable Sales: Quarterly comparable sales results were positive across all segments as we began to lap the significant impact of COVID-19 on our global results beginning in March 2020. Guest counts remained negative for all segments.

• U.S.: Comparable sales results benefited from average check growth with double digit positive comparable sales across all dayparts. The Company’s strong national menu and marketing offerings, as well as growth in delivery and digital platforms, contributed to the comparable sales growth.

 

• International Operated Markets: Results reflected strong positive comparable sales in the U.K., Australia and Canada, partly offset by significantly negative comparable sales in France and Germany. Comparable sales in many markets continued to be impacted by varying levels of government imposed COVID-19 restrictions on restaurant operations.

• International Developmental Licensed Markets: Monthly comparable sales results improved sequentially throughout the quarter. The strong quarterly comparable sales were primarily driven by China and Japan.

 

KEY FINANCIAL METRICS – CONSOLIDATED

Dollars in millions, except per share data

 

Quarters Ended March 31,

2021 2020 Inc/ (Dec) Inc/ (Dec) Excluding Currency Translation

Revenues $ 5,124.6 $ 4,714.4 9 % 5 %

Operating income 2,281.3 1,693.6 35 30

Net income 1,537.2 1,106.9 39 35

Earnings per share-diluted $ 2.05 $ 1.47 39 % 35 %

Results for the quarter reflected stronger operating performance in the U.S. due to higher sales-driven restaurant margins. Results for the quarter included $135 million of pre-tax strategic gains, or $0.13 per share, primarily related to the sale of

McDonald’s Japan stock, which reduced the Company’s ownership by an additional 3%.

Foreign currency translation had a positive impact of $0.06 on diluted earnings per share for the quarter.

EARNINGS PER SHARE-DILUTED RECONCILIATION

 

Quarters Ended March 31,

2021 2020 Inc/ (Dec) Inc/ (Dec) Excluding Currency Translation

GAAP earnings per share-diluted $ 2.05 $ 1.47 39 % 35 %

Strategic gains (0.13)

Non-GAAP earnings per share-diluted $ 1.92 $ 1.47 31 % 27 %

 

Excluding the strategic gains, for the quarter net income increased 30% (26% in constant currencies) and diluted earnings per share increased 31% (27% in constant currencies).

RESTAURANT UPDATE

The Company has continued to follow the guidance of expert health authorities to ensure the appropriate precautionary steps are taken to protect the health and safety of our people and our customers.

As a result of COVID-19 resurgences, throughout the quarter there have been numerous instances of government restrictions on restaurant operating hours, limited dine-in capacity and, in some cases, mandated dining room closures particularly in the International Operated Markets. These restrictions are impacting most of the Company’s markets across Europe, particularly those with fewer drive thru restaurant locations. The Company expects some restrictions in various markets so long as the COVID-19 pandemic continues

CWEB Analyst’s have initiated a Buy Rating for  McDonald  (NYSE:MCD  and potential upside of $298 in 2021.


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