McDonald's Q4 2022 earnings preview: Here's what to expect

McDonald's (MCD) is set to report Q4 2022 earnings on Tuesday, January 31, before the market open.

Analysts are keeping an eye on commodity and labor inflation, U.S. consumer sentiment, the resiliency of the European customer, results of recent digital and marketing efforts, and more.

Here's what Street expects from the Golden Arches, per Bloomberg consensus estimates:

  • Revenue: $5.75 billion dollars, down 4.6% year-over-year

  • Adjusted earnings per share: $2.44, up 6.3% year-over-year

  • U.S. same-store sales: up 7.62%

  • International Operated markets same-store sales: up 7.56%

CITI analyst Jon Tower said this quarter the firm expects “a generally positive update” from the company with strong trends here in the U.S., easing foreign exchange headwinds, and improvement in its foreign exposure, specifically “that the European business has already seen the worst of inflation’s impact on the top & bottom-lines.” Tower’s price target is $279.00, with a Neutral rating.

Lauren Silberman of Credit Suisse expects similar momentum. In a note, she said, "MCD previously highlighted continued momentum across markets despite challenging consumer sentiment, and warm weather in Europe in 4Q was likely a tailwind." Credit Suisse has a price target of $298 and outperform rating.

Bank of America, which has a Neutral rating and price target of $309.00, says the pandemic boosted McDonald's to widen the gap between itself and U.S. fast food hamburger restaurant peers.

Between 2017-2019, McDonald's outpaced its peers by a mean gap of ~280 basis points, "with the onset of COVID, the gap widened further, to 310 basis points on average since Q1 of 2020." BofA analysts calls this "particularly impressive" as the Golden Arches already controls roughly 35% of U.S. market share for fast food burger joints.

Similarly, Wedbush's Nick Setyan expects "menu pricing, ongoing menu innovation, the continued rollout of loyalty, staffing level improvements, operational efficiencies, and marketing initiatives to drive near-term U.S. SSS (same-store sales) growth and market share gains." The firm has an Outperform rating and $300 price target.

Wall Street is also eager to hear more on McDonald's "strategic plan," Accelerating the Arches 2.0.

In it, McDonald's highlights its "MCD" growth pillars: M—Maximize marketing (brand, affordability), C—Commit to the core (burgers, chicken, coffee), and D— double down on the 4Ds (delivery, digital, drive-thru, development).

Many of which Wall Street says are key drivers.

BofA says in this sort of environment, similar to the global financial crisis in 2007-2011, it's crucial to "amplify the importance of scale" with ads and tech. "When consumers' budgets are pressured, cutting through marketing noise is critical.

Credit Suisse's Silberman also is encouraged by "marketing, digital initiatives and select menu innovation," with the adult Happy Meal and return of Halloween Pails driving same-store sales in October and record digital transactions. Other drivers include the return of the McRib at the end of October and sharing season promotion in December.

"MCD generated ~7.7MM digital app downloads in 4Q, the highest in the history of our data set, up nearly 50% YOY, and 2022 app download growth was up nearly 40%, outperforming all burger peers," according to the note.

Jared Garber of Goldman Sachs said in a note, "We believe MCD will continue to offer value oriented promotions in FY23 that will drive new loyalty program membership, and drive engagement and frequency for the brand to support its strong sales momentum as consumers seek the brand for value."

Garber, among others, is also interested in unit growth. "We are looking for further detail on MCD’s plans to accelerate unit growth — including geographic opportunities and a framing of the incremental growth the company expects to achieve," he said.

Goldman Sachs has a Buy rating and price target of $296.

Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].

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