MCDMcDonald’s released better-thanexpected first-quarter financials. The
top line rebounded 9% from a year earlier
(up 5% on a constant-currency basis), to
$5.125 billion, just ahead of our $5.100 billion forecast. Systemwide sales rose 12%
(8%) and comparable-store sales increased
7.5%, reflecting growth in all geographic
segments. The United States led the
charge, posting a same-store sales rise of
13.6%. On our shores, there were fewer operating restrictions than in other regions,
and the company continued to benefit from
its digital platforms, delivery services, and
vast network of drive-thrus. Moreover, the
average check increased as people bought
for families and groups, not just themselves, and the strength was seen across
all dayparts. Marketing initiatives also
helped. In the International Developmental Licensed market, comps were up 6.4%,
driven by sequential improvement
throughout the quarter, primarily in
China and Japan. The International Operated market only notched a 0.6% comp increase, as negative results in France,
Germany, and other parts of Europe were
partially offset by strength in the United
Kingdom, Australia, and Canada. All told,
it was a nice bounce-back quarter for
McDonald’s, and global same-store sales
and revenues topped comparable 2019
levels, despite operating restrictions. On
the profitability front, adjusted earnings
per share clocked in at $1.92, up 31% from
a year earlier and ahead of our $1.80 forecast. The company was able to leverage
the higher sales and greater average check
to increase margins, while favorable
foreign-currency movements provided a
$0.06-per-share tailwind.
We look for the momentum to continue. The U.S. has been making notable
progress against COVID-19, though we
still anticipate McDonald’s enviable position in the delivery/drive-thru/digital game
to keep it top of mind for consumers, even
as more-normalized spending patterns
slowly emerge.
As for the stock, capital appreciation
potential is subdued at the recent
quotation. However, conservative investors will certainly appreciate the equity’s
high marks for Safety and Price Stability,
along with the respectable dividend yield.
Matthew E. Spencer, CFA May 21, 2021
EARNING PER SHARE/////
2016 5.71
2017 6.66
2018 7.90
2019 7.84
2020 6.05
2021
