CHICAGO _ Is it time for McDonald's rebound to slow?
Analysts are predicting that the world's largest burger chain, which has enjoyed earnings growth and larger-than-expected sales in recent quarters, will report Tuesday morning that growth slowed in the second quarter. That's due to a mix of factors both within and outside of the Golden Arches. Here's a look at what Wall Street expects from the company's second-quarter earnings report, and why:
BREAKFAST RUT
McDonald's launched all-day breakfast in October, and enjoyed a huge jump in both sales and customer traffic as the promotion spurred renewed interest in the chain. The spark from all-day breakfast has lasted longer than even top company executives expected, but analysts are predicting that this is the quarter where McDonald's will see a return to more normal growth.
"I think they're doing a lot of things right, I just don't think there's something like all-day breakfast that will drive things" in the near future, Morningstar analyst R.J. Hottovy said.
And while McDonald's, headquartered in suburban Chicago, has other promotions under its hat _ like a nationwide revamp of the McPick2 value menu _ the company isn't expected to unveil them until later this year. The McPick2 has been tested in many forms in the last six months, but the company hasn't announced what it will look like in the future.
THE BIG BAD WORLD
It appears that Americans ate out less in the spring. Traffic began slowing in May, Hottovy noted, partially attributed to factors including the U.S. presidential election and increased civil unrest and violence. Both Starbucks and Dunkin' Donuts' parent noted slowing traffic growth when they reported earnings last week. A KeyBanc analyst last week said pizza delivery companies were seeing a surge in business as more people ordered in instead of going to restaurants.
It's not clear how global factors, like Brexit, will impact McDonald's results, Hottovy said, although they could take a hit because of currency devaluation.
OTHER FACTORS
McDonald's said earlier this month it will take $235 million in pretax charges in the second quarter on costs related to moving its corporate headquarters to Chicago and franchising more of its restaurants. The fast food giant, which plans to move to the city in spring 2018, did not say if the figure included costs related to buyouts, which sources say are being offered. It plans to release more details on those charges Tuesday, and plans to incur additional charges as well.
BY THE NUMBERS
Analysts, on average, expect McDonald's to report earnings of $1.39 per share on revenue of $6.27 billion for the quarter ended June 30, according to FactSet. Last year, the company earned a profit of $1.26 per share on revenue of $6.5 billion.
