McDonald’s Corporation (NYSE: $MCD) operates the McDonald’s restaurant chain. Its restaurants serve locally relevant meals, including burgers, chicken sandwiches, soft drinks, desserts, and French fries.
On Monday, February 5, 2024, McDonald’s released the fourth quarter and full-year results for fiscal 2023, before markets opened.
McDonald’s Q4 Performance
McDonald’s Q4 results were a mixed bag. Its global same-store sales increased 3.4% in the quarter, lower than the projected 4.79%. US same-store growth was 4.3%, lower than the projected 4.45% increase. International same-store sales grew 4.4%, a decline from the 12.6% growth reported at the same time last year and lower than the expected 5.03%.
In the quarter, international licensed markets saw same-store sales growth of 0.7%, compared to 16.5% a year ago. It was also below the analyst estimate of 5.06%. McDonald’s attributed the decline to the ongoing Middle East conflict.
In Q4, the company reported a 14% growth in adjusted EPS to $2.95, 11% on an FX-neutral basis, higher than the expected $2.81. Total revenue grew to $6.41 billion, an 8% increase Y/Y. However, it was below analysts’ estimate of $6.5 billion.
For the full year, McDonald’s had revenue of $25.49 billion, a 10% increase from the $23.18 billion reported in FY22. However, it was below analysts’ projections of $25.53 billion. The company reported a full-year adjusted EPS of $11.94, higher than the expected $11.78 and an 18% increase from the previous year.
Same-store sales rose 9% overall compared to the expected 9.41% in FY23, growing by 8.7% in the US. Meanwhile, international same-store sales increased 9.2% compared to the expected 9.53% during fiscal 2023. Its international licensed markets segment grew 9.4%, lower than the expected 10.51%.
CEO’s Comments
Discussing the results, McDonald’s CEO Chris Kempczinski acknowledged the existing macroeconomic challenges in 2024. According to the CEO, the company’s existing growth plan, Accelerating the Arches, has boosted same-store sales growth by 30% since 2019.
The CEO said higher menu prices and larger check sizes drove Q4 growth. Additionally, marketing efforts, including the return of Happy Meal Squishmallows and McNugget Buddies, had boosted growth.
The CEO attributed the growth in Q4 to its loyalty program. According to him, program members accounted for $6 billion in sales across 50 markets in the quarter. Program members brought in over $20 billion for the year, representing a 45% rise from 2022.
McDonald’s Plan for The Future
During its Investor Day event on December 6, 2023, the company announced a record growth plan to 50,000 locations globally by 2027. As of Q3, the company has 41,198 locations globally, with over 39,000 owned by franchisees.
The company plans to grow its online loyalty program to 250 million members globally from 150 million 90-day active users by 2027. At the event, the company revealed it had recorded over $20 billion in worldwide annual sales via the program. By 2027, the company plans to grow sales to $45 billion annually via the loyalty program.
The company also plans to grow its delivery capabilities. They expect 30% of all orders to be deliveries from the McDonald’s app by 2027. Currently, the delivery system handles 455,000 deliveries globally at any moment.
At the investor day event, McDonald’s also revealed they had partnered with Google Cloud for tech-driven solutions. The collaboration will entail connecting Google’s cloud technology to the latest generative AI solutions across their restaurants worldwide. Their goal is to improve the efficiency of operations and reduce business disruptions.
McDonald’s Stock Performance
Following the release of McDonald’s Q4 results, investors reacted negatively. The stock was trading at $287.76 per share, 3.13% lower than its Friday closing price, during early morning trading as of 09:36 AM in New York.
The stock is trading close to its 52-week high of $302.39 per share and above its 200-day moving average of $283.82. However, it is below its 50-day moving average of $291.05.
As of Friday’s closing price, MCD stock is up 10.87% over the past 12 months. In the past six months, the stock has grown 1.94%. Year-to-date, the stock price has remained unchanged. After the Q4 report, MCD stock is down 3.26% year-to-date during early morning trading on February 5, 2024.
McDonald’s Stock Forecast
Analysts give MCD stock an overall strong buy rating. They have set a broad price target range for the stock, with a high of $383 and a low of $300. McDonald’s stock’s average price target is $326.30, a 13.40% upside.
Is McDonald’s A Buy?
Fast food stocks faced significant headwinds in 2023 amidst fear of softening demand due to rising food inflation. However, McDonald’s emerged relatively unscathed.
According to Wedbush Securities analyst Nick Setyan, McDonald’s will continue to see growth in same-store sales in the near term. Setyan believes high food pricing, loyalty programs, marketing campaigns, and operational efficiency will drive the company’s growth.
Analyst Andy Barish from Jeffries also has a positive outlook on MCD stock. According to him, McDonald’s is the best play, in the Restaurants industry, amidst uncertainty and macroeconomic challenges.
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