Key Predictions For Q3 Earnings Reports Of MCD & CMG
Zacks Investment Research | Oct 22, 2017 10:17PM ET
The Q3 reporting cycle has started on an encouraging note with multiple companies reporting significant earnings and revenue growth compared with the prior quarters. Particularly, the momentum on the revenue side is quite palpable.
Per the latest Earnings Preview , total earnings for the 87 S&P 500 members that have reported results (as of Oct 20) are up 9.4% from the year-ago period, courtesy a 7.3% rise in revenues. Notably, 71.3% of the companies that have posted their quarterly numbers have surpassed earnings estimates, while 70.1% have exceeded top-line expectations.
Restaurant Stocks in Focus
The restaurant industry belongs to the broader Retail-Wholesale sector and the space is expected to deliver mixed performance this earnings season. Overall Q3 earnings for the sector are expected to be down 2.2% year over year, though revenues are anticipated to rise 5.8%.
In the recent quarters, the restaurant industry’s sales trends have been very challenging, given soft consumer spending on dining out, which has resulted in low consumption. Declining comps due to sluggish traffic trends along with rising costs are thus taking the sheen out of restaurant companies. Nevertheless, restaurant operators are undertaking various sales building and digital initiatives to enhance guest experience and, in turn, drive traffic and comps.
Also, the third quarter of 2017 marked the seventh consecutive quarter of negative comparable sales (comps) for the restaurant industry as a whole, per TDn2K’s Black Box Intelligence. Markedly, the quarter posted the second worst sales and traffic growth rates in over five years. In fact, the recent hurricanes appear to have particularly impacted results for restaurant companies in the quarter.
Thus, though the overall scenario is still bordering on the negative and the earnings picture seems to be less enticing, innovative operators with strong fundamentals are likely to continue exhibiting strength even in a not-so-favorable environment.
Let’s take a look at what might be in store for the two restaurant companies that are set to report their third-quarter 2017 results on Oct 24. Will these companies manage to put up a decent performance?
Chipotle Mexican Grill, Inc. (NYSE:CMG) came up with a positive earnings surprise of 7.41% in the last quarter. However, the trailing four-quarter average earnings surprise is a negative 3.94%.
Chipotle Mexican Grill, Inc. Price and EPS Surprise
Will Food Safety Issues Hurt Chipotle's Q3 Earnings? ).
McDonald's Corp. (NYSE:MCD) pulled off a positive earnings surprise of 6.79%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the last 12 quarters, with the trailing four-quarter average earnings surprise coming in at 7.44%.
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McDonald's Corporation Price and EPS Surprise
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