McDonald's (MCD) is scheduled to report results of its third quarter before the market open on Wednesday, October 27, with a conference call scheduled for 8:30 am ET. What to watch:
1. COVID CONCERNS: On McDonald's Q2 earnings conference call in July, management noted that the Delta variant had brought "more stops and starts to COVID story," adding that China comps had yet to return to 2019 levels amid COVID resurgences. On an optimistic note, the company said it expected comps to surpass pre-pandemic levels in Q3.
In August, McDonald's said that all of its U.S. corporate workers must be fully vaccinated by September 27 and postponed the official reopening date of its headquarters to Oct. 11 from Sept. 7, according to The Wall Street Journal's Benjamin Mullin, citing a note to employees sent by the burger giant.
2. WELLS FARGO BOOSTS TARGET: On October 14, Wells Fargo analyst Jon Tower raised the firm's price target on McDonald's to $276 from $269 and kept an Overweight rating on the shares. The analyst said he expects McDonald's will post low-teens percentage same-store sales growth in the U.S. versus 2019, with in-line numbers enough against the Delta dip in August, and sees room for some upside in International Operated Markets results, even with tourism as a bigger seasonal hurdle to overcome in Q3. That said, Tower expects greater focus on read-throughs on broader consumer themes, namely labor/distribution cost pressures, lower-income discretionary spending against changing government benefits and inflation's outsized impact on the lower income consumer, breakfast routines normalizing, and digital engagement post-COVID. He is optimistic that investors will emerge encouraged that McDonald's scale and global sales momentum will give the company significant advantages navigating these challenges, and continues to view the stock's near-term risk-reward as attractive.
3. BOOSTS DIVIDEND, RESUMES SHARE REPURCHASE: In September, McDonald's board declared a quarterly cash dividend of $1.38 per share of common stock payable on December 15 to shareholders of record at the close of business on December 1. This represents a 7% increase over the company's previous quarterly dividend and brings the Q4 dividend payout to over $1B. The company said the dividend increase reflects confidence in the Accelerating the Arches growth strategy and a continued focus on driving long-term profitable growth for all stakeholders. Additionally, the company announced the resumption of its share repurchase program.
4. TESTING MCPLANT BURGER: Earlier this month, McDonald's said it planned to test the meatless McPlant burger created as part of its partnership with Beyond Meat (BYND) in eight U.S. restaurants next month, according to CNBC's Amelia Lucas. The company has already started selling McPlant burgers in some international markets, including Sweden, Denmark, Austria, the Netherlands and the U.K., the report noted.
McDonald's
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Beyond Meat
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