McDonald’s Strong Performance: Beating Expectations in a Challenging Market

Brandon Foster on December 4, 2023

In a constantly evolving marketplace, McDonald’s has demonstrated its capacity to not only weather challenges but to thrive. The fast-food giant has recently reported its quarterly earnings, and the results have not just met but exceeded analysts’ expectations. Despite facing headwinds like falling foot traffic in its U.S. restaurants and the steady rise in operating costs, McDonald’s has not only maintained its foothold but solidified its position. In this article, we will delve into the intricacies of McDonald’s recent performance, explore how the company achieved this exceptional feat, and contemplate the implications for the company’s future endeavors.

The Financial Report: A Closer Look

Remarkable Revenue Growth:

The standout performance of McDonald’s in the latest financial quarter was the substantial surge in revenue. The company recorded a jaw-dropping 14% increase in revenue, reaching an impressive $6.69 billion. This figure substantially exceeded the expected revenue of $6.58 billion. The scale of this revenue growth reflects McDonald’s adaptability and unwavering commitment to excellence in a competitive market.

Earnings per Share: An Impressive Figure

In terms of earnings per share, McDonald’s achieved $3.19, when adjusted, which surpassed the expected $3 per share. This substantial outperformance is a testament to the robust financial position of the company. It illustrates the company’s ability to not only meet but exceed market expectations.

Consumer Perception: A Valued Brand

While increased menu prices were a reality in certain regions, McDonald’s managed to maintain its reputation as a value-driven and affordable option in the eyes of consumers. This resilient consumer perception stands as a testament to the strength of the brand and its ability to navigate cost pressures without alienating its customer base.

Same-Store Sales Growth: Surpassing Expectations

Global same-store sales growth, a key indicator of a company’s health, skyrocketed by an astonishing 8.8% during the quarter. This not only outperformed but exceeded StreetAccount estimates, which predicted a growth rate of 7.8%. McDonald’s is proving its mettle in the global fast-food arena, solidifying its presence and reaffirming its status as a leading industry player.

U.S. Same-Store Sales: Strategic Pricing

Within the U.S., same-store sales surged by 8.1%, a result attributed to strategic price increases and the success of well-executed marketing campaigns. The company projects a further increase in pricing, to the tune of about 10% in 2023. This projection underscores McDonald’s confidence in its ability to sustain the impressive sales growth it has achieved.

Market Share Gain: A Significant Achievement

Although U.S. foot traffic experienced a decline, McDonald’s succeeded in gaining market share among middle- and high-income consumers. This points to a strategic pivot among these consumer segments, as they opt for McDonald’s over costlier dining alternatives, underscoring the brand’s appeal and value proposition.

Future Market Expansion: Capitalizing on Wage Hikes

McDonald’s anticipates further expansion in the lucrative California market as the minimum wage for fast-food workers is set to increase to $20 per hour. This anticipated wage hike positions McDonald’s advantageously in the region, indicating its potential to not only endure but to thrive in a challenging economic environment.

International Success: A Global Triumph

McDonald’s international markets division reported a remarkable same-store sales growth of 8.3%. This success is a testament to the strong demand in regions such as the United Kingdom, Germany, and Canada, reinforcing the brand’s global appeal and adaptability.

Global Expansion: Seizing Opportunities

Even in regions grappling with higher inflation, the international developmental licensed markets segment, which includes China and Japan, experienced an extraordinary same-store sales growth of 10.5%. McDonald’s achieved this accomplishment in China by strategically promoting its burger deals, demonstrating its ability to creatively boost sales, even in challenging economic climates.

Future Plans: Strategic Vision

The company is poised to offer an investor update on December 6 in Chicago. During this event, McDonald’s is set to unveil additional details about its accelerated development plans, providing insights into the company’s strategic vision for the future. This commitment to transparency and forward-thinking demonstrates McDonald’s focus on continuous innovation and long-term sustainability.

A Testimony to Resilience and Excellence

In a world of shifting markets and consumer preferences, McDonald’s has managed not only to endure but to excel. Its extraordinary ability to maintain a positive consumer perception, capture market share, and adapt to changing market dynamics underlines its resilience. As the company continues to innovate and expand its global footprint, it stands as a significant and enduring player in the fast-food industry, showcasing its dedication to excellence and a commitment to staying ahead of the curve.

Coca-Cola exceeds Wall Street revenue expectations

Brandon Foster on April 24, 2023

Coca-Cola — On Monday, beverage titan Coca-Cola shared its quarterly earnings, which came out as a positive.

The company’s earnings and revenues were revealed to have topped analysts’ expectations.

Factors behind the positive development can be attributed to price hikes and higher demand for the beverage.

Trading

On Monday morning trading, shares of Coca-Cola were up by less than 1%.

Based on a survey by Refinitiv analysts, the following is a comparison of the company’s report with Wall Street’s expectation:

Coca-Cola earnings per share: 68 cents adjusted
Coca-Cola revenue: $10.96 billion adjust
Wall Street expected earnings per share: 64 cents
Wall Street expected revenue: $10.8

Coke reported that first-quarter net income due to shareholders of $3.11 billion (72 cents per share) were up from $2.78 billion (64 cents per share) from 2022.

Coca-Cola earned 68 cents per share, excluding certain tax matters, restructuring changes, and other items.

Additionally, net sales rose by 5%, going up to $10.98 billion.

Organic revenue, which removes the impact of acquisitions and divestitures, went up by 12% in the quarter.

It was largely driven by the higher prices of Coca-Cola drinks.

Higher prices

As with most companies this past year, Coca-Cola has been increasing its prices to counter the effects of inflation.

Majority of the first quarter’s price hikes were implemented in 2022.

However, company executives said Coke raised prices even more across operating segments over the first three months of the year.

However, higher prices have also had a muted effect on the demand for Coke products.

Unit case volume

Coca-Cola’s unit case volume grew by 3% in the quarter, excluding the impact of pricing and currency changes.

In North America, volume was flat, while volume fell by 3% in areas like Africa, Europe, and the Middle East.

However, Latin America and Asia-Pacific regions showed that demand remained strong.

Coke also reported a 3% volume growth with its sparkling soft drinks units.

The Coca-Cola soda showed positive signs, with reports of 3% volume growth.

Meanwhile, Coke Zero Sugar’s volume also saw an 8% increase.

Several of the company’s divisions witnessed volume growth of 4% including:

Water
Sports
Coffee
Tea

The surge can be attributed to strong demand for Coke’s coffee and bottled water.

The company’s coffee business reported that its volume saw a 9% volume increase.

Meanwhile, the water division volume rose by 5%.

The tea division saw volume shrink by 4% in the quarter following an earthquake in Turkey.

Sports drinks volume, which covers Bodyarmor and Powerade, also saw declines.

Additionally, the suspension of Coke’s Russian business offset some strong parts, which includes strong sales for the Fairlife dairy brand in the United States.

Previous forecast

In February, Coca-Cola projected comparable revenue growth of 3% to 5%, with comparable earnings per share growth at a higher 4% to 5% for 2023.

Meanwhile, Wall Street projected revenue growth of 3.9%, while earners per share growth were cast at 3% for the year.

Coca-Cola CEO James Quincey said:

“Inflation is likely to moderate as we go through the year, and there we expect the rate in which prices are going to increase will start to moderate and become more normal by the end of the year.”

In the latest earnings report, the company said it was projecting organic revenue growth of 7% to 8% with comparable earnings per share growth of 4% to 5%.

Furthermore, Coca-Cola is expecting commodity inflation to impact its cost of goods sold by mid single digits this year.

CFO John Murphy spoke with analysts during the company conference call, saying that while oil spot prices and freight costs are down, other commodities’ higher prices will stay for a longer period.

Murphy added that Coca-Cola is holding on to its financial flexibility during its long-running tax battle with the IRS.

Earlier in November 2020, the US Tax Court maintained that the company owed $3.4 billion in taxes.

Since then, the figure has been cut down to $1.6 billion.

Murphy said the company is waiting for the tax court to make its final opinion on the case before the company moves forward in the appeals process.

“Overall, we don’t expect the tax dispute to have a bearing on our ability to deliver on our capital allocation agenda and drive long-term business growth.”

Tag: Earnings