McDonald’s Beats Q4 Earnings Estimates, Falls Short on Revenues

McDonald’s Stock

McDonald’s Corporation (NYSE:MCD) has unveiled its mixed financial results for the fourth quarter of 2023, surpassing the Zacks Consensus Estimate for earnings but falling short of revenue expectations. Both the top and bottom lines exhibited growth on a year-over-year basis.

Chris Kempczinski, the President, and CEO of McDonald’s, credited the strong performance to the successful execution of the Accelerating the Arches strategy. This initiative contributed to a cumulative comparable sales growth of over 30% from 2019 levels. Despite anticipated macroeconomic challenges in 2024, the management expressed confidence in the company’s resilience.

Earnings & Revenue Overview

In the fourth quarter of 2023, McDonald’s reported adjusted earnings per share (EPS) of $2.95, surpassing the Zacks Consensus Estimate of $2.81. The adjusted earnings marked an 11% increase from the corresponding figure in the prior-year quarter.

However, quarterly net revenues of $6.4 billion fell short of the consensus estimate of $6.5 billion, although the top line demonstrated an 8% year-over-year growth.

Sales Breakdown

Sales at company-operated restaurants reached $2.5 billion, representing a 12% year-over-year increase, while sales at franchise-operated restaurants amounted to $3.9 billion, showing a 6% year-over-year rise. Other revenues declined by 13% year over year to $63.5 million. Our model had predicted a sales increase of 18% for company-operated restaurants and 4.1% for franchise-operated restaurants, respectively.

Comparable Sales Details

Global comparable sales expanded by 3.4% in the quarter, compared to 12.6% in the prior-year quarter. Notably, the U.S. segment saw a 4.3% year-over-year increase, while internationally operated markets and international developmental licensed segments reported gains of 4.4% and 0.7%, respectively.

Operating Highlights & Expenses

During Q4 2023, McDonald’s total operating costs and expenses rose by 8% year over year to $3.6 billion. Operating income increased by 8% year over year to $2.8 billion, and net income reached $2 billion, reflecting a 7% year-over-year growth.

Balance Sheet Snapshot

As of December 31, 2023, cash and equivalents stood at $4.6 billion, up from $2.6 billion at the end of December 2022. Long-term debt as of December 31, 2023, amounted to $37.2 billion, compared to $35.9 billion a year earlier.

2023 Financial Highlights

In 2023, McDonald’s reported total revenues of $25.5 billion, up from $23.2 billion in 2022. Net income for 2023 reached $8.5 billion, compared to $6.2 billion in the previous year. Diluted EPS for 2023 stood at $11.94, compared to $10.10 reported in 2022.

Featured Image: Unsplash

Please See Disclaimer