Earnings preview: Will McDonald’s Q4 prove to be a treat?

McDonald’s Corporation (MCD) is scheduled to report earnings results for the fourth quarter of 2018 on Wednesday, January 30, before market open. Analysts estimate earnings of $1.89 per share, reflecting a 10% growth year-over-year. Revenue is projected to decline over 3% to $5.16 billion.

The fast-food chain’s refranchising efforts have been impacting revenues over the past couple of quarters and this trend is likely to continue in the fourth quarter as well. Although a drop in the number of company-owned restaurants can hurt revenues, these can be offset by an increase in the number of franchised restaurants.

The decline in revenues is likely to impact earnings in the quarter as well. However, McDonald’s has been undertaking several initiatives such as improving its digital channels and delivery services along with menu innovations. These measures are likely to benefit sales and boost growth. The overall sentiment around the fourth quarter appears to be positive.

McDonald’s stock jumps as Q3 comps gain on favorable pricing

During the third quarter, McDonald’s surpassed earnings estimates with an adjusted EPS growth of 19%. Despite a year-over-year decline of 7%, revenue also came in ahead of expectations. Comparable sales have been growing steadily and posted a 4.2% growth last quarter. Sales at company-owned restaurants registered an 18% decline last quarter while sales at franchised restaurants grew 6%.

Analysts are positive on McDonald’s and a majority of them have given the stock a Buy rating. Over the past three months, the stock has gained 5%. As of 12:55 pm ET, the stock was down 1%.

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