McDonald’s looks unstoppable ahead of its latest earnings


Few things can stand in McDonald’s way, it seems.

Wall Street is expecting more growth ahead of the company’s latest quarterly results on Feb. 5. This comes as tightening wallets, rising costs, and fears around weight loss drugs’ impact hammered fast food stocks last year.

But business at the Big Mac maker keeps chugging along, as consumers stay hungry for value meals. Its adjusted earnings per share are expected to jump 7% to $2.82, while revenue is expected to grow 9% to $6.5 billion. Even the storm from GLP-1s seems to be passing.

In December, McDonald’s CEO Chris Kempczinski told Yahoo Finance, “We’re seeing no impact today with GLP-1s and … nobody has any idea what the impact is going to be in the future.”

Analysts are optimistic that McDonald’s can push through, well, just about anything.

It’s “hard to see McDonald’s not ‘winning’ in any consumer environment,” Wedbush analyst Nick Setyan wrote in a client note. He projected sustained same-store sales growth in the near term, driven by menu pricing and innovation, loyalty programs, effective marketing, and operational execution and efficiencies.

Jefferies’ Andy Barish named the stock a top pick in 2024, calling it the “best defensive and offensive play in restaurants,” with “resiliency in an uncertain or weak macro [environment].” Barish expects the chain to further invest in digital, delivery, drive-thru and chicken products.

McDonald’s stock is up 7% in the past year, underperforming the S&P 500’s 20% gain.

As workers gradually return to the office, the chain also seems to be gaining back breakfast diners. Per Placer.ai, 16.7% of store visits in 2023 were made between 7 a.m and 10 a.m. ET, up from 15.9% in 2022, though it’s still lower than 2019 when 18% of visits were made during those hours.

Citi analyst Jon Tower anticipates breakfast challenges for the entire industry, but called McDonald’s digital efforts and massive scale a “core advantage.”

“McDonald’s has done a phenomenal job of, particularly in the past three years, in ramping this mobile order ahead and loyalty program in the US,” Tower told Yahoo Finance Live.

Higher app usage will allow better data collection, enabling McDonald’s to gain more insights into customers and their behaviors, added Towers.

In Q3, systemwide digital sales — which includes sales made on the app, delivery, or on the kiosk — totaled $9 billion across its six biggest markets, making up 40% of total sales. That’s a jump from Q2, which saw $8 billion in digital sales.

And another growth spurt may be coming, as McDonald’s aims to expand from 41,000 to 50,000 restaurants by 2027. This will “better capture increasing demand McDonald’s is seeing worldwide,” said Barish.

Even though there are “some ongoing broader quick-serve restaurant franchisee profitability concerns,” Barish expects the issues to abate. Forthcoming interest rate cuts could also help investors “better appreciate” the growth plan, he said.

Plus, it may soon have another franchise on its hands —CosMc.

The drive-thru only concept, which is approximately 2,800 square feet compared to the typical 4,000 to 4,500 square foot restaurant, is intended to solve the 3 PM slump with customizable drinks, alongside sweet and savory treats.

McDonald’s opened its first location in Bolingbrook, Illinois on Dec. 7 with plans to launch nine others in Texas this year.

Lines form outside McDonald’s new beverage-led, drive-thru only chain, CosMc’s, during the concept’s secret opening in Bolingbrook, U.S. December 7, 2023. REUTERS/Eric Cox

Lines form outside McDonald’s new beverage-led, drive-thru only chain, CosMc’s, during the concept’s secret opening in Bolingbrook, U.S. December 7, 2023. REUTERS/Eric Cox (REUTERS / Reuters)

So far, the pilot location seems to be showing results.

Based on preliminary data from Placer.ai, CosMc saw “more than double the number of visits that a typical McDonald’s saw chainwide during December 2023…and more than triple the number of visits per square foot,” Placer.ai Head of Analytical Research R.J. Hottovy wrote.

He suspects the numbers would have been “much higher” if the concept had additional capacity to “satisfy the overwhelming demand.”

Its audience also tends to skew younger, with the largest audience between 18 to 34 years old — another win for the Golden Arches.

Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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