Shares of McDonald’s Corp. (NYSE: MCD) broke-out to new all-time highs on trading volume more than four times the stock’s daily average yesterday. McDonald’s shares had consolidated over a three-year period before breaking definitively to new highs on October 12, coincidentally, just two trading days before McDonald’s released yesterday’s break-out news.
The consensus of the 25 analysts polled by Thomson Financial Network was for the company to report third quarter MCD earnings per share of $1.28. McDonald’s was able to report $1.40 per MCD share: a 9.4 percent beat. The consensus for McDonald’s third quarter gross sales was $6.4 billion, the company was able to beat on the top line as well, reporting $6.6 billion.
MCD stock closed at $110.87 in regular trading yesterday. Over the past ten years, MCD stock has returned 227.5 percent. The Dow Jones Industrial Average (^DJI), of which MCD shares are a member, has returned 61.9 percent over the same period.
The $1.40 EPS number represents year over year growth of 28.4 percent. For the fourth quarter of 2015, analysts were looking for MCD EPS growth of 3.5 percent, growth of -2.5 percent for the full 2015-year, and 9.6 percent in 2016. EPS growth averaging 6.7 percent annually over the coming five years is the MCD consensus.
McDonald’s third quarter revenues of $6.4 billion represent an 8.3 percent slowdown from 2014 numbers. Revenue of $6.1 billion had been the consensus for the fourth quarter. Analysts expect McDonald’s to report revenues of $25.0 billion in 2015 and $24.1 billion in 2016, representing year over year contractions of 8.9 percent and 3.5 percent, respectively. Other than the third quarter 28.4 percent MCD EPS growth number, McDonald’s reported few other year over year metrics appearing to register in the double digits.
Going into yesterday’s report, McDonald’s had $4.0 billion in cash and held $17.9 billion in debt. McDonald’s is highly levered, carrying a debt to equity ratio of 169.5 percent. McDonald’s currently trades at 21.5 times 2016 EPS consensus numbers. It would seem that the market is looking for more than what is currently expected in terms of sales and earnings growth, as evidenced by yesterday’s trading.
McDonald’s growth numbers are certainly nowhere near those of Amazon.com, Inc. (NASDAQ: AMZN), which is forecast to grow its EPS by 405.8 percent this year, as reported by the Inquisitr. Certainly, if McDonald’s could produce sustained EPS growth just one-quarter that of Amazon’s, shareholder exuberance could be huge.
McDonald’s management also reports returning “$3.1 billion to shareholders through share repurchases and dividends. This brings the year-to-date return to shareholders to $7.1 billion against our targeted return of $8-9 billion in 2015.”
“In the U.S., third quarter comparable sales increased 0.9%, the segment’s first quarterly comparable sales increase in two years. 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, contributed to the segment’s performance,” McDonald’s said in its press release.
MCD shares pay an annual dividend of $3.40, which currently yields 3.24 percent. McDonald’s employs 420,000, as reported by Yahoo! Finance. The third quarter 2015 financial results reported by McDonald’s are the second in a row to beat estimates. The amount of each beat has grown sequentially larger.
At the end of June, McDonald’s beat MCD EPS estimates by 1.6 percent. Yesterday’s report included EPS numbers that beat estimates by 9.4 percent, indicating that Wall Street has had a difficult time getting a grasp on the financial performance of the fast food giant.
[Feature Photo by Peter Larsen/Getty Images for Pandora]