Revenues are Ramping Up at McDonald’s

The fast-food giant McDonald’s (MCD) got off to a good start this year. Revenues and earnings per share were up a respective 4% and 15% during the March quarter, note Value Line analysts.

COVID-19 cases have declined worldwide and people are venturing outside more. Plus, China, one of the fast-food chain’s key markets, lifted quarantine restrictions and reopened its environment. The strength of the U.S. dollar, however, somewhat constrained franchise revenue growth over the past few months due to the effect of foreign currency translations.

Global comparable-store sales will probably climb at a low-single-digit clip this year, thanks to better volume, selective price increases, and an improved menu. Digital ordering and delivery services will probably also help boost the top line in the near term. Strategic business improvements and higher volume, stronger product mix (increased sales of higher priced, more profitable menu items), and success in raising prices should help offset headwinds from rising operating and labor expenses.

Consolidated revenues may well increase 5%-6%, reaching $24.5 billion, this year. A further gain of about 6%, to $26.0 billion is conceivable for 2024.

Management’s efforts ought to better position the company for the long haul. McDonald’s is trying to widen its international footprint, and launched Accelerating the Arches program to expand its reach. Accelerating the Organization is aimed at modernizing and standardizing processes across the chain.

Additionally, the Performance and Customer Excellence initiative should help improve service, menu appeal, and the ambiance of the restaurants.

These initiatives, along with higher volume, favorable pricing, and a stronger product mix, are helping the company to offset elevated commodities expense, operating costs, and employee wages. Margins should stay healthy, going forward. We estimate share earnings, adjusted for special items, will advance from $10.10 in 2022 to $11.25 this year and to $12.00 next year.

The share price is trending positive, it holds appeal for conservative investors. MCD offers a respectable dividend yield and well-defined prospects for regular growth in that payout. McDonald’s is ranked 1 (Highest) for Safety, denoting a stellar Financial Strength rating and a top score for Price Stability.

Consequently, investors who like to count on some income and want to limit volatility in their equity positions may want to consider these shares.

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