McDonald's (MCD -0.05%) isn't losing its sizzle. The fast-food giant on Thursday reported operating results for the quarter that ended in late March, and the news was almost uniformly good.
Sure, growth is slowing in a few markets and costs are rising. But Mickey D's is gaining market share in an expanding industry. And, while management didn't issue a detailed outlook, the future looks bright for the business in 2022 and beyond.
Let's take a closer look.
Image source: Getty Images.
Sales trends
McDonald's achieved a 12% boost in comparable-store sales, keeping growth roughly on pace with the strong results investors saw through late 2021. Of course, the key U.S. market isn't expanding as quickly today as it was in earlier phases of the pandemic, with comps decelerating to 3.5% from 7.5% last quarter. But that's no surprise considering that sales jumped 14% in the year-ago quarter when financial stimulus payments boosted consumer spending.
Management highlighted steady market share wins, which were driven by popular menu items and an aggressive push into the digital and home-delivery niches. "We have continued to drive growth by staying on the side of the consumer and executing our strategy," CEO Chris Kempczinski said.
Restaurant margins
The profitability picture was clouded by one-time charges related to taxes and suspended operations in Russia and Ukraine. Reported earnings fell 28% year over year. But looking beyond the headline profit metric reveals impressive financial strength.
MCD operating margin (TTM). Data by YCharts. TTM = trailing 12 months.
McDonald's earned $372 million in restaurant-level profits, up 17% after adjusting for currency exchange swings. That spike was supported by rising sales, but also higher prices. Executives said they were thrilled that these financial wins could occur in what they described as "an increasingly complex and uncertain operating environment."
Looking ahead
McDonald's doesn't provide short-term growth forecasts, and the next few quarters might show high volatility given the big demand swings in the industry through most of 2021.
But the chain appears to be on pace to boost sales again in 2022 and perhaps add to the record $10 billion in annual operating income that it achieved last year.
As for the stock, McDonald's continues to earn its premium valuation by notching industry-leading sales growth, profit margins, and cash flow. Those financial wins all start with delivering great values to fast-food fans. But they ultimately translate into solid returns for investors holding on to this restaurant stock.
