McDonald’s is preparing to reveal its third-quarter earnings this Tuesday, with analysts expecting mixed results as the chain faces ongoing challenges.
In light of a recent E. coli outbreak linked to its Quarter Pounder burger, McDonald’s sales have been impacted by a temporary pullback in some locations across the US.
The Centres for Disease Control and Prevention (CDC) recently identified slivered onions as a potential culprit in the outbreak, though the chain’s fresh beef patties have been cleared.
McDonald’s has been combating consumer spending slowdowns worldwide, intensified by inflationary pressures, with analysts forecasting only modest gains in its domestic sales.
Here’s what to expect from the fast-food giant’s upcoming report.
Analysts’ expectations for Q3 earnings
- Earnings per share (EPS): Analysts surveyed by LSEG anticipate an EPS of $3.20, reflecting McDonald’s steady margins despite the outbreak.
- Revenue forecast: Revenue is projected to reach $6.82 billion, supported by sales growth initiatives, particularly in the US market.
In the US, McDonald’s has been deploying strategies to attract value-conscious consumers by introducing $5 combo meals, launched in June.
This move is expected to drive a 0.5% same-store sales increase in its domestic market, compensating slightly for declining demand abroad.
StreetAccount estimates indicate a 0.6% overall decline in same-store sales due to weaker international demand, especially in Europe and Asia, where inflationary pressures have impacted discretionary spending.
E. coli outbreak update: onion supply under scrutiny
McDonald’s temporarily removed the Quarter Pounder from affected outlets after the CDC linked the E. coli outbreak to slivered onions.
Health authorities have ruled out fresh beef patties as the source, yet the incident, which affected 75 individuals and resulted in one fatality, has negatively influenced consumer confidence and sales.
McDonald’s has now reintroduced the item, albeit without onions, hoping to reassure consumers and restore traffic in impacted regions.
Shares of McDonald’s have dropped by 6% since news of the outbreak, remaining flat for the year amidst ongoing operational challenges.
With a market cap of around $210 billion, the fast-food chain’s performance reflects investors’ cautious outlook amid broader economic uncertainties.
McDonald’s response to inflationary pressures has focused on value offerings, especially in high-inflation markets like the US, where consumers are favoring lower-priced meals.
The value-driven menu initiative could help counteract weakened demand globally, as inflation pushes consumers to seek affordable options when dining out.
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