McDonald’s Q2 Earnings – Strong US And Chinese Growth Whet Investor Appetites

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McDonald’s Corp (NYSE:MCD) total revenue in the second quarter was $6.5bn, with like-for-like sales up 11.7%, ahead of market estimates of 9.2%. Double-digit growth was seen in the US and overseas, both in operated and licensed markets.

Operating profits were $3.1bn, up 20% when excluding certain non-operating items.

Full year operating margins are still expected to land at about 45%, with free cash flow conversion of over 90%.

Earlier in the week, McDonald’s announced a first-quarter dividend of $1.52 per share, an increase of 10.1%.

The shares were up 1.9% in pre-market trading.

McDonald’s Earnings

“Ronald McDonald’s furry purple colleague, Grimace, appears to have provided a further boost to Q2 sales at the golden arches, which have come in ahead of market forecasts. Growth was strongest, in international markets particularly in the licensed operations which were led by a rebound in China

Whilst consumer spending in the US may be coming under some pressure, Mcdonald’s brand power and continued solid execution, such as the now viral Grimace Birthday Meal campaign, see customers keen to come back for more. Given the relatively low price point for what some see as a feel good treat, the Group’s restaurants are likely better shielded than some if conditions deteriorate. 

The market has reacted positively to the update, building on a valuation which is already at a premium to the long-term average. That’s certainly been earnt over the years but does raise the expectation that Chris Kempczinski can keep serving up market-beating results. ”

Article by Derren Nathan – head of equity research at Hargreaves Lansdown