McDonald's Profit Beats Forecasts as Revenue Misses and US Sales Slip Again

McDonald's reported a mixed third quarter on Wednesday. Profit beat Wall Street forecasts, helped by stronger sales overseas, while revenue fell short and customer traffic at its US restaurants declined again.

Adjusted earnings were $3.57 a share, above the $3.38 that analysts surveyed by LSEG had expected. Revenue rose 1 percent to $7.16 billion, below the $7.29 billion consensus forecast. Net income rose to $2.49 billion, or $3.51 a share, from $2.28 billion, or $3.18 a share, a year earlier. Operating income rose 7 percent to $3.60 billion.

US diners stay cautious

Sales at restaurants open at least 13 months rose 1.5 percent worldwide, slightly ahead of the 1.3 percent gain analysts had expected. In the United States, the same measure fell 0.2 percent as guest counts dropped. Sales across all restaurants, including franchised ones, rose 4 percent to more than $38 billion.

Chief executive Chris Kempczinski said McDonald's delivered another quarter of global growth, led by solid performance across much of its international business, according to Dow Jones Newswires coverage of the results. At an investor day in September, executives had warned that US same store sales were negative in July and August, and said they expected September to return to growth.

McDonald's has struggled to bring lower income US diners back through its doors. US comparable sales rose only 0.8 percent in the second quarter and turned slightly negative in July. Wednesday's figures show the home market still lagging the rest of the world, even as the wider group grows.

Shares rise before the open

The results arrived weeks after McDonald's set out its NEXT strategy at its September 23 investor day, the company's plan to win back diners put off by higher prices. Shares rose 1.9 percent to $268 in premarket trading on Wednesday, Barron's reported, after closing down 0.9 percent at $263.04 on Tuesday. The stock is still down about 14 percent this year. The company also raised its dividend by 4 percent.

The quarter covers July through September, and it lands on one of the busiest days of the earnings season, with hundreds of US companies reporting on Wednesday. For McDonald's, the test now is whether the value push in its NEXT plan can turn US guest counts positive again before the end of the year.