McDonald’s Non-GAAP EPS of $2.95 Beaten Expectations by $0.12, but Revenue of $6.41 Billion Missed Them by $40 Million

McDonald’s just released its quarterly earnings numbers, which appeared somewhat softer than anticipated, pushing its stock moderately down in the U.S. premarket as of February 5. During the quarter, McDonald’s posted an 8% increase in consolidated operating income, which was 6% higher, adjusted for constant currency.

There was a 3.4% increase in global comparable sales, with generally positive comparable sales observed in all segments. The U.S. segment experienced a 4.3% increase, slightly missing consensus of 4.5%, while the International Operated Markets segment saw a 4.4% increase. However, the International Developmental Licensed Markets segment only posted a 0.7% increase — reportedly, attributed to the impact of the war in the Middle East.

The growth was reportedly driven by ‘strategic menu price increases’, resulting in strong average check growth. The International Operated Markets segment, however, fell substantially short of expectations, with a 4.4% increase compared to the consensus of 8.3%. Looking ahead, McDonald's (MCD) plans to open approximately 2,100 new restaurants worldwide and achieve a net restaurant growth of around 1,600 for the year. The company anticipates a full-year free cash flow conversion rate of approximately 90% and expects the operating margin to be in the mid-to-high 40% range. We remain neutral on the MCD stock after this update.