McDonald's stock bounces as revenue beat, new 'larger' burger offset profit miss

By Emily Bary and Tomi Kilgore

Revenue was slightly above forecasts, but same-store sales growth came up short

McDonald's Corp. said Tuesday its value message continued to resonate with customers during tough times, as the fast-food giant reported first-quarter revenue that rose above Wall Street's estimates and said it will be testing a bigger burger in the coming months.

That helped the stock (MCD) reverse an early sharp loss to trade little changed, even though the company missed profit expectations for the first time in more than two years and also missed on same-store sales.

"And as we look to further build on our leadership in beef, or team of chefs from around the world have created a larger, satiating burger," said Chief Financial Officer Ian Borden on the post-earnings call with analysts, according to an AlphaSense transcript. "We'll be testing this burger in a few markets later this year, ensuring that it has universal appeal before scaling it across the globe."

The stock inched up less than 0.1% in midday trading, after being down as much as 5.1% in the premarket session after the results were released.

"Consumers continue to be even more discriminating with every dollar that they spend as they faced elevated prices in their day-to-day spending, which is putting pressure on the [quick-service restaurant] industry," said Chief Executive Chris Kempczinski in the post-earnings call with analysts, according to an AlphaSense transcript.

That said, "it's clear that McDonald's offers delicious food at a great value, and customers continue to tell us this through our survey work," Kempczinski added.

For the first-quarter, the company reported net income of $1.93 billion, or $2.66 a share, compared with $1.80 billion, or $2.45 a share, in the same period a year ago.

Excluding nonrecurring items, adjusted earnings per share rose to $2.70 from $2.63, but analysts were modeling $2.72 a share. That marked the first miss of adjusted EPS expectations since the fourth quarter of 2021.

Total revenue rose 4.6%, to $6.17 billion from $5.90 billion, while the FactSet consensus was for $6.16 billion in revenue.

Total comparable-store sales, or sales of restaurants open at least 13 months, rose 1.9%, to miss the FactSet consensus of 2.1% growth. U.S. comparable sales were up 2.5%, helped by "strategic menu price increases," to miss expectations for a 2.7% rise.

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Comparable sales in international developmental licensed markets dipped 0.2% and impacted by the Middle East war.

McDonald's stock has dropped 7.7% year to date, while the Dow Jones Industrial Average DJIA, of which McDonald's is a component, has gained 0.8%.

-Emily Bary -Tomi Kilgore

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04-30-24 1302ET

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