Fast-food giant McDonald's (MCD -0.42%) reports fourth quarter and full-year results on Thursday. The company hit its stride during the recession but has since hit some bumps in the road amid increasing competition from Wendy's (WEN 0.43%), Burger King (BKW.DL), and Yum! Brands (YUM -0.47%)Will McDonald's continue to slip in this week's earnings report?

McDonald's has nearly 35,000 locations in 119 countries. Over 80% of the locations are franchise-owned. The company's the largest global fast-food chain and that size offers a great deal of leverage when it comes to supply negotiations. While McDonald's doesn't have explosive growth ahead, the company can continue to move forward with new products and the geographic expansion of existing products. The increasingly popular McCafe products exemplify this potential. 

Even with all of this potential, McDonald's had a rough 2013 and that could continue in the fourth-quarter report. Here's what to look for in the earnings release. 

Quarterly estimates -- and results -- to beat
Analysts estimate McDonald's will report fourth-quarter revenue of $7.1 billion and earnings per share of $1.39, and full-year revenue of $28.1 billion with EPS of $5.56. McDonald's has met or beat quarterly revenue estimates for the past five quarters but it missed on EPS in two of those quarters. 

McDonald's fourth-quarter report last year beat analyst estimates with revenue of $7 billion and EPS of $1.38. The full-year results included revenue of $27.6 billion and EPS of $5.36. Global comparable-store sales were up 0.1% for the quarter and 3.1% for the year.

Watch the comps
McDonald's was one of the rare winners during the recession because of the low prices of its menu items in comparison to those of other fast-food establishments such as Wendy's, which saw a steep customer drop-off at around the same time. However, the improving economy brought out more competition and McDonald's comparable-store sales began to suffer. 

 

2011

2012

2013

Q1

4.2%

7.3%

1%

Q2

7.7%

4.4%

1%

Q3

5%

1.9%

0.9%

Q4

7.5%

0.1%

  ---
Source: Company filings 

The company further weakened in 2012 and 2013 due to the launch of hit-or-miss menu items that complicated kitchens and slowed service times. McDonald's has to improve comps through new menu offerings because the company has limited opportunities to increase prices without alienating its customers, who are used to low prices. However, the company made an attempt to do this in November with the launch of the Dollar Menu and More, which expanded the old Dollar Menu to include products at multiple price points up to $5. The new menu closely resembles the structure of Wendy's Right Price, Right Size value menu. 
 
 
Competitor comparison 
What do analysts expect from the fourth quarters of McDonald's closest competitors?  

 

Q4 Rev.

Q4 EPS

FY Rev.

FY EPS

Wendy's

$617 M

$0.06

$2.5 B

$0.25

Burger King

$281 M

$0.23

$1.15 B

$0.84

Yum!

$4.3 B

$0.80

$13.2 B

$2.93
Source: Yahoo Finance and Businessweek
 
Wendy's shares were up over 6% last week after the company provided preliminary fourth-quarter results. The company reported that consolidated revenue was $629.9 million for the quarter and $2.5 billion for the year. EPS was $0.06 for the quarter and $0.01 for the year. Comparable-store sales for the quarter were down 0.2% at company-owned stores and 0.6% at franchise stores. For the year, comps were up 1.6% at both company-owned and franchise stores.  
 
Foolish final thoughts 
McDonald's will likely finish out 2013 feeling the comps pinch. However, the company remains the largest and strongest fast-food chain in the world. The company's growth potential has its limits but it will continue to exist well into the future.