US Markets
McDonald's Seen Posting Largely In-Line First-Quarter Results, RBC Says
McDonald's (MCD) first-quarter results are likely to largely match Wall Street's expectations, with potential for downside given the company's exposure to low-income US consumers that are facing war-driven elevated energy prices, RBC Capital Markets said in a note e-mailed Wednesday.The fast-food giant is facing a "slightly unfavorable" setup heading into its latest quarterly results -- expected May 7 -- with higher fuel prices expected impact the spending of lower-income US consumers, an important segment that the company "over-indexes" to, RBC analyst Logan Reich said in a note to clients."Given their relative exposure to lower-income consumer in the US, which appears to be facing increasing macro headwinds, the set up skews slightly unfavorable heading into the print," Reich wrote. "We look for any commentary on impact from Middle East conflict, which is likely only a slight directional headwind in (the first quarter) and into (the second quarter)."Energy prices have soared in the wake of the US-Israel war with Iran that started at the end of February, curtailing shipments through the crucial Strait of Hormuz. On Tuesday, US President Donald Trump announced an extension of a recent ceasefire deal with Iran.RBC expects McDonald's to report first-quarter earnings of $2.76 a share on revenue of $6.43 billion. The Street is looking for $2.75 and $6.48 billion, respectively, according to the note. The brokerage pegs consolidated comparable sales growth at 4.1% versus the Street's expectations for a 3.9% increase. In the US, RBC expects same-store sales to rise 4.5%, compared with the Street's 4.2% growth view.Earlier this month, a survey by the University of Michigan showed that consumer sentiment hit the lowest on record in April, reflecting heightened worries about higher prices and the overall economic fallout from the Middle East conflict.McDonald's is making incremental adjustments to its value offerings with the aim of boosting traffic and improving consumer perceptions, according to RBC. However, additional value offerings could "cannibalize" its core menu and offset any incremental traffic benefit, Reich said.Earlier in April, the company announced it will introduce an under $3 menu and a $4 breakfast meal deal at participating restaurants in the US, starting April 21.Price: $301.36, Change: $-0.48, Percent Change: -0.16%
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