McDonald's Provides Business Update Amid Coronavirus Pandemic

McDonald's Corporation MCD recently provided an update on financial performance amid the COVID-19 pandemic. Notably, with dining rooms reopening and strong digital and delivery system, the company is optimistic about its response to the global crisis. Following the update release, the company shares grew 0.4% during market trading hours on Jun 16.

Comparable Sales

With 95% of the restaurants operating all over the world, McDonald's has been witnessing sequential improvement in comparable sales.

In the month of April, comparable sales in the U.S. and International Operated Markets were down 19.2% and 66.7%, respectively. However, for the month ended May 31, the metric declined only 5.1% and 40.5% at U.S and International Operated Markets, respectively.

Total comparable sales improved from a fall of 39% (for the month ended Apr 30) to 20.9% decline (for the month ended May 31). Quarter to date ended May 31, total comparable sales declined 29.8%.

Restaurant Reopening Updates

In a bid to recover business post coronavirus-induced shutdowns, McDonald's continues to follow regulatory guidelines amid store re-openings to ensure health and safety of its customers and employees.

As of Jun 15, more than 1000 restaurant dining rooms have reopened in the United States, with limited seating capacity. However, approximately 100 restaurants remain closed due to non-compliance with regulatory guidelines.

Coming to international markets, most of the restaurants in France, Italy, Spain, United Kingdom, Australia and Germany have resumed operations. Notably, the restaurants have been operating with drive-thru and delivery services along with dining room access with limited capacity.

Under the international developmental licensed markets, all restaurants in China and Japan have reopened with limited dining room capacity. Also, 80% of restaurants in Brazil have resumed operations.

Other Updates

Although the virus has triggered a catastrophe in terms of lives lost and financial impact, the company appears resilient enough to navigate through these uncertain times. Notably, McDonald's has taken several actions to enhance liquidity, reduce costs and strengthen organizational structure. This primarily includes deferral of cash collection for certain rent and royalties earned from franchisees.

Moreover, the company is providing additional targeted financial support to those limited franchisee organizations which were impacted by the global crisis. It is also offering support to companies operating mainly through delivery services.

McDonald's president and CEO Chris Kempczinski stated, "The steps we are taking in response to the pandemic and to accelerate recovery, while continuing to serve the great and familiar taste of a meal from McDonald's, will position us well for the next phase of this crisis.”

Notably, management is confident about emerging from the pandemic with competitive strength. So far, shares of the company have declined 3.6% compared with the industry’s fall of 6.5%.

Zacks Rank & Key Picks

McDonald's currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks from the same space include Wingstop Inc. WING, Restaurant Brands International Inc. QSR and Domino's Pizza, Inc. DPZ. Wingstop sports a Zacks Rank #1, while Restaurant Brands and Domino’s carry Zacks Rank #2 (Buy).

Wingstop has a three-five year earnings per share growth rate of 11%.

Earnings in 2021 for Restaurant Brands are expected to surge 36.1%.

Domino's has a trailing four-quarter positive earnings surprise of 12.7%, on average. The company’s earnings beat the Zacks Consensus Estimate in the last four quarters.

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