McDonald's earnings: Revenues hit, while EPS misses the mark in Q1 financial results

Today, on April 30^th, fast food giant McDonald’s Corporation (NYSE: MCD) reported its Q1 2024 financial results before US markets opened.

Global comparable sales were up marginally, at a disappointing 2% higher.

Compare this to Q1 of 2023, which showed a 12.6% growth in the same numbers.

According to the company itself, this marks the 13th consecutive quarter of positive sales growth for McDonald's.

Of this, sales in the US increased by 2.5%, while the international operated markets segment also increased 2.7%. Meanwhile, international developmental licensed markets segment decreased very slightly, by 0.2%.

EPS numbers

Diluted earnings per share were $2.66, an increase of 9% (9% in constant currencies). Excluding the current year charges described above of $0.04 per share, diluted earnings per share was $2.70, an increase of 2%.

Consolidated revenues for the quarter were more than $6 billion, an increase year-on-year of over 4% in constant currencies.

Meanwhile, consolidate operating income increased 8%.

Expectations ahead of earnings

Frankly, McDonald’s had more stacked against it than a quarter pounder. Inflation that’s stickier than hot wings meant that most analysts were expecting muted growth, if any, this quarter.

The company has touted its ‘Accelerating the Arches’ growth campaign as having boosted global comparable sales by more than 30% since 2019, but only 9% of that growth came from the 2023 year when far more was expected.

The ongoing war in the Middle East has negatively affected the brand's sales and image in that region, as well as the amount of stores opened there. Plus the McDonald's stock price is down almost 8% this year to date.

Broadly speaking, analysts expected McDonald's revenue to rise by 4.4% year over year this quarter to $6.14 billion, while adjusted EPS were expected to come in 3.4% higher at $2.72 per share.

2024 financial year outlook

In December 2023, alongside unveiling the latest in its ‘Accelerating the Arches’ campaign, McDonald’s published these 2024 objectives:

• Nearly 2% of systemwide sales growth
• Operating margins in the mid to high 40% range
• Net new restaurant unit growth of over 4%
• Free cash flow conversion in the 90% range

Previous earnings

McDonald’s reported somewhat lackluster results in February for a fourth quarter, with global sales disappointing somewhat – although systemwide sales exceeded forecasts.

The results included:

• Global comparable sales increasing 3.4%
• Of those, U.S. increased 4.3% and International Operated Markets segment increased 4.4%
• Conversely, the international licensed markets segment increased only 0.7%, reflecting the impact of the war in the Middle East
• The diluted earnings per share was $2.80, an increase of 8%
• Consolidated revenues increased 8% (or 6% in constant currencies).
• Systemwide sales increased a healthy 6% (5% in constant currencies).
• Consolidated operating income increased 8% (6% in constant currencies).