McDonald’s Continues to Be Impacted By the War in the Middle East

Image: McDonald’s shares have largely traded sideways the past couple years. 

By Brian Nelson, CFA

On April 30, McDonald’s (MCD) reported mixed first-quarter results with revenue coming in roughly in-line with consensus and non-GAAP earnings per share missing slightly. During the first quarter, global comparable sales advanced 1.9% led by strength in the U.S. offset in part by weakness in its International Developmental Licensed Markets segment due to the war in the Middle East.

Management continues to focus on execution as it outlined in the first-quarter press release:

Our global comparable sales growth in the first quarter marks 13 consecutive quarters of positive comparable sales growth with 30% growth over the last 4 years. As consumers are more discriminating with every dollar that they spend, we will continue to earn their visits by delivering leading, reliable, everyday value and outstanding execution in our restaurants. As we look to the rest of 2024 and beyond, we remain focused on leveraging the competitive advantages within our Accelerating the Arches plan and growing QSR market share to drive long-term growth.

On a consolidated basis, McDonald’s revenues advanced 5% (4% in constant currencies), while systemwide sales increased 3% (3% in constant currencies). Adjusted consolidated operating income advanced 2% (2% in constant currencies) in the quarter on a year-over-year basis. On a diluted basis, adjusted earnings per share increased 2% (2% in constant currencies). 

Though impacts from the Middle East weren’t great and the pace of adjusted operating income and adjusted earnings per share growth weren’t as high as we would have liked in the first quarter, we’re sticking with McDonald’s in the Best Ideas Newsletter portfolio. McDonald’s mostly franchised business model works well in the current inflationary environment, and we continue to like the value it provides to consumers.

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