McDonald's (MCD -0.55%), the world's biggest fast-food chain, said first-quarter earnings fell short of Wall Street estimates because of the continuing impact of boycotts of some restaurants amid the war in the Middle East.
Net income rose 7% from a year earlier to $1.93 billion, or earnings per share (EPS) of $2.66, which was less than analyst estimates of $2.72. Earnings in the year-ago quarter were $1.8 billion, or $2.45 a share.
"The continued impact of the war in the Middle East more than offset positive comparable sales in Japan, Latin America and Europe" in international licensed markets, the company said in a statement. McDonald is perceived as favoring Israel in the regional conflict, and customers in some predominantly Arab countries have shunned the company's restaurants.
Revenue came in slightly stronger than expected at $6.17 billion against forecasts of $6.16 billion on strength in U.S. and company operated stores overseas.
| Data Metric | Q1 2024 Actual | Estimate | Q1 2023 Actual | Year-over-Year Change |
|---|---|---|---|---|
| Earnings Per Share (EPS) | $2.66 | $2.72 | $2.45 | 9% |
| Revenue ($B) | $6.17 | $6.16 | $5.90 | 5% |
| Net income ($B) | $1.93 | $1.8 | 7% |
Understanding McDonald's
McDonald's has prospered by franchising the majority of its restaurants, which lets it collect high-margin fees from franchisees while limiting operational expenses associated with direct management.
Recently, McDonald's has doubled down on solidifying the company's dominance in existing markets but also capturing new demographics by leveraging digital sales channels and adhering to modern consumer demands for corporate responsibility and menu diversity.
Quarter highlights
McDonald's reported its 13th consecutive quarter of global comparable sales growth, a sign of the company's enduring appeal across various markets
However, the company faced hurdles in the U.S. market, where sales growth slowed. Concerns linger over sales trends in core markets and input cost pressures on it franchisees.
Looking ahead
McDonald's Chief Executive Officer Chris Kempczinski said the company will focus on its value proposition with an eye on enhancing customer experience and operational efficiency.
Investors are advised to watch for updates on McDonald's digital initiatives, global expansion efforts, and strategies to address the softening sales in the U.S. Notably, the outlook includes potential pricing adjustments and promotional activities aimed at rejuvenating customer traffic amid competitive and macroeconomic challenges.
