Ahead Of McDonald's Q4 Results
Fast food giant McDonald's Corp. (MCD) continues to gain momentum by focusing on its customers and "what matters most to them - hot and fresh food, fast and friendly service, and a contemporary restaurant experience at the value of McDonald's."
Also, the company is leveraging its competitive strengths: iconic menu items that customers love, a unique franchise model that empowers local entrepreneurs, size and scale that makes operational investments efficient, and a global, well-diversified geographic footprint. "Together, these brand attributes provide McDonald's with the foundation and capabilities for continued success."
Steve Easterbrook, President and Chief Executive Officer, said, "My priorities for McDonald's as a modern, progressive burger company are three-fold: driving operational growth, creating brand excitement and enhancing financial value. We are taking bold, urgent action to reset the business and prepare the Company for the next chapter of its history."
Recently, the company raised its refranchising target to 4,000 restaurants from 3,500 restaurants, which accelerates the pace of refranchising and increases the global franchised percentage from the current 81% to about 93% by the end of 2018. This positions the company to meet its new longer-term goal to become 95% franchised. The majority of the refranchising will take place in the High Growth and Foundational Market segments, the company noted.
McDonald's also increased net annual G&A savings to $500 million, the vast majority of which will be realized by the end of 2017, reflecting a $200 million increase over the previously announced G&A savings target and represents a nearly 20% reduction from the company's G&A base at the beginning of 2015.
In addition, the company increased its cash return to shareholders target to about $30 billion for the three-year period ending 2016 - a $10 billion increase over the prior target, with incremental debt funding the vast majority of the increase. The $30 billion target will be nearly double the $16.4 billion returned to shareholders for the three-year period ending 2013.
November 10, McDonald's Board declared a quarterly cash dividend of $0.89 per share of common stock payable on December 15, 2015 to shareholders of record on December 1, 2015, representing a 5% increase over the previous quarterly dividend and brings the fourth quarter dividend payout to more than $800 million.
While reporting third-quarter results, the company said, "As we begin fourth quarter, comparable sales are expected to be positive in all segments. While still in the early stages, we believe our turnaround plan is starting to generate the change needed to reposition McDonald's as a modern, progressive burger company."
Fourth-quarter numbers are due to be released before the bell on Monday, January 25, with analysts polled by Thomson Reuters estimating earnings of $1.23 per share on revenue of $6.22 billion. Analysts' estimate typically exclude certain special items.
In the last quarter, the company reported upbeat results, supported by a sales recovery in China. Comparable sales grew in the U.S. for the first time in two years.
Net income increased to $1.31 billion or $1.40 per share from $1.07 billion or $1.09 per share in the year ago quarter. On average, 25 analysts polled by Thomson Reuters expected earnings of $1.28 per share.
Total revenues dropped to $6.62 billion from $6.99 billion in the prior year, but came well above Wall Street consensus estimate of $6.41 billion. Meanwhile, revenues increased 7% in constant currencies.
The company reported Global comparable sales growth of 4%, reflecting positive comparable sales in all segments.
In the U.S., third quarter comparable sales improved 0.9%, the segment's first quarterly comparable sales increase in two years. The segment benefited from the introduction of the new Premium Buttermilk Crispy Chicken Deluxe sandwich and breakfast, including a return to the classic recipe ingredients for McDonald's iconic Egg McMuffin.
Comparable sales for the International Lead Markets segment increased 4.6% for the third quarter led by strong performance in Australia, the U.K. and Canada and positive results in Germany.
In the High Growth Markets segment, comparable sales increased 8.9%, reflecting very strong comparable sales performance in China and positive performance in most other markets. Emphasis on value and breakfast during the quarter contributed to China's sales recovery in the quarter.
In addition, the company returned $3.1 billion to shareholders through share repurchases and dividends. This brings the year-to-date return to shareholders to $7.1 billion against the company's targeted return of $8 billion - $9 billion in 2015.
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