McDonald’s Global Sales Hit By Pandemic; Top Analyst Sticks To Hold

McDonald’s Corp. (MCD) said global same-store sales dropped almost 24% in the second quarter, while profit missed analysts’ estimates as the coronavirus-induced lockdowns led to shutdowns of its fast-food restaurants.

Shares depreciated 2.5% to $196.24 at the close on Tuesday. The fast-food chain reported that global same-store sales declined 23.9% in the second quarter year-on-year, which is slightly below the 23.24% expected by analysts. Same-restaurant sales in the US, one of its largest markets, fell 8.7%, while most of its drive-through, takeout and delivery operations remained open.

Total revenue in the quarter ended June 30 slumped 30% to $3.76 billion year-on-year beating analysts’ estimates of $3.68 billion. Net income tanked 68% to $483.8 million during the same comparative period. On an adjusted basis, McDonald’s earned 66 cents per share, which is 8 cents below consensus.

“Our strong drive-thru presence and the investments we’ve made in delivery and digital over the past few years have served us well through these uncertain times”, said McDonald’s CEO Chris Kempczinski. “We saw continued improvement in our results throughout the second quarter as markets reopened around the world.”

In addition, the fast-food chain announced that it will permanently shut 200 of its lower-volume restaurants, with more than half of the planned closures located in Walmart (WMT) centers.

Shares in McDonalds have been hit hard earlier this year but have now recouped almost all of their losses and are currently trading down less than 1% year-to-date.

Following the Q2 results, five-star analyst Brian Bittner at Oppenheimer maintained a Hold rating on the stock, saying that he continues to search for catalysts for stock outperformance.

Same-store sales in the “US have turned positive in July as drive-thru assets continue to prove invaluable,” Bittner wrote in a note to investors. “While the business is on a better path than we originally modeled, we’d look for more compelling catalysts for outperformance before we take a bullish stance on upside.”

Looking ahead, Bittner expects results likely to be choppy for several quarters due to COVID-19, adding that he believes that MCD’s cash flow and strong balance sheet will allow it to weather this period of uncertainty.

Meanwhile, the rest of the Street has a bullish outlook on the stock. The Strong Buy analyst consensus breaks down into 20 Buy ratings versus 4 Hold ratings. The $209.20 average price target implies 6.6% upside potential in the shares over the coming 12 months. (See MCD stock analysis on TipRanks)

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