Categories Analysis, Consumer

Is McDonald’s (MCD) stock a buy after strong Q2 earnings?

US same-store sales climbed about 26%, mainly reflecting the new additions to the menu including the highly popular BTS meal

Despite being part of an industry hit hard by the pandemic, McDonald’s Corporation (NYSE: MCD) managed to stay largely unaffected, in what could be a testament to its brand power and sustainability of the business model. More than a year after the virus outbreak, the fast-food chain is serving customers with an all-new menu as they return to the stores.

Earnings Fail to Impress

After hitting an all-time high this week, McDonald’s shares made a surprise pullback mid-week and suffered one of the biggest intraday losses, despite the company’s impressive earnings report. But, it has regained strength since then and is currently hovering near the recent peak. Interestingly, there is more room for growth and that makes the stock an attractive pick. The consensus rating on MCD is strong buy.

Read management/analysts’ comments on McDonald’s Q2 results

It seems the California-based company was better prepared to face the pandemic than many others, thanks to its ability to adapt during times of uncertainty and effective supply chain planning. The management’s prompt efforts to enhance digital capabilities, the introduction of a new loyalty program, and the revamped menu also came into play. Currently, steps are being taken to streamline the workforce and increase wages to better serve customers.

McDonald’s Q2 2021 earnings infographic

The BTS Meal

Adjusted earnings more than doubled year-over-year to $2.37 per share in the second quarter, driven by a 57% jump in revenues to $5.9 billion. Both company-owned stores and franchised stores registered strong growth. The numbers also came in above the market’s prediction. The positive outcome can be attributed mainly to the high demand for the new chicken sandwich and the BTS meal launched a few months ago.

A lot of promotional activity went into the successful launch of the BTS meal of McNuggets, supported by a collaboration with the Korean pop band after which it is named. Interestingly, the new menu continues to attract customers to the stores, after driving up US same-store sales by 26% in the most recent quarter.  

Opening Up

After being confined to their homes for more than a year, people have finally started venturing out and setting a new pattern for eating out. However, the COVID crisis is far from over and governments in many regions have started reinstating restrictions that were eased earlier, concerned about the spread of the delta variant. In short, the continuing uncertainty could be an impediment to McDonald’s’ efforts to restore normalcy.

Key highlights from Domino’s Pizza’s Q2 2021 earnings results

McDonald’s stock is among the top gainers this year, growing about 18% in the past six months alone, all along outperforming the market. The shares, which bounced back pretty quickly after the post-earnings selloff this week, traded higher throughout Thursday’s regular session.

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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