In the third quarter, analysts expect McDonald’s (MCD) to post revenues of $5.33 billion—a fall of 7.5% from $5.76 billion in the third quarter of 2017.
To make the company more efficient and stable, McDonald’s has adopted a refranchising strategy. The company is focusing on increasing the ownership of its franchised restaurants to ~95% in the long term. Refranchising company-owned restaurants is expected to lower McDonald’s revenues during the quarter.
By the end of the second quarter, McDonald’s operated 2,885 company-owned restaurants—345 units less compared the restaurant count at the end of the third quarter of 2017. The decline in company-owned restaurants’ unit count is expected to lower the company’s revenues during the quarter.
Some of the revenue declines are expected to be offset by the addition of new franchised restaurants and positive SSSG (same-store sales growth). The company operated 775 more franchised restaurants at the end of the second-quarter—compared to the unit count at the end of the third quarter of 2017.
To drive the SSSG, McDonald’s is focusing on developing its EOTF (Experience of the Future) initiative, improving convenience through delivery and digital initiatives, and innovating its menu. By the end of the second quarter, the company had deployed the EOTF initiative in 5,000 of its restaurants. McDonald’s plans to convert 4,000 more restaurants to the EOTF initiative by the end of 2018. The company expanded its delivery service to 13,000 restaurants at the time it announced the second-quarter earnings. McDonald’s is working with UberEATS to optimize its delivery process and deliver orders as quickly as possible.
Peer comparisons and outlook
For 2018, analysts expect McDonald’s to post revenues of $21.02 billion—a fall of 7.9% from $22.82 billion in 2017.
Next, we’ll discuss analysts’ EPS expectations for the third quarter.
Of the 31 analysts that cover McDonald’s (MCD), 74.2% recommended a “buy” as of October 15, while 25.8% recommended a “hold.”
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