- The earnings beat outweighed a revenue miss. McDonald’s reported adjusted earnings of $3.57 a share versus the $3.38 expected by LSEG analysts, 19 cents above consensus by our calculation, while revenue of $7.16 billion, up 1%, fell short of the $7.29 billion estimate. Shares rose about 5% in morning trading.
- The US business is stabilizing. Same-store sales at US restaurants open at least 13 months fell 0.2%, better than the 0.5% decline analysts expected, according to StreetAccount. CFO Ian Borden said same-store sales returned to growth in September after falling in July and August, though he did not say US same-store sales would be better in the fourth quarter.
- International markets carried the quarter. Global same-store sales rose 1.5%, above the 1.3% forecast, with the international developmental licensed markets segment, including Japan and China, up 4.2% versus 2.1% expected. The international operated markets division rose 1.4%, short of the 2.1% estimate, with France a weak spot.
- Profit grew. Net income was $2.49 billion, or $3.51 a share, up from $2.28 billion, or $3.18 a share, a year earlier, an increase of about 9% by our calculation.
What Happened?
McDonald’s reported mixed third-quarter results on Wednesday as traffic to its US restaurants fell, leading to a slight decline in domestic same-store sales. CEO Chris Kempczinski said the company was “encouraged by improvement as the quarter progressed following our intervention on value.” To reverse the decline, McDonald’s focused its marketing on Extra Value Meals and restarted regional and national promotions on its mobile app. The company is also testing two new value menus, one with mix-and-match bundles and one with set combinations, and plans to roll out the winner across the US in early 2027.
Why It Matters?
McDonald’s is a bellwether for the lower- and middle-income consumer, and its results suggest heavy discounting is stopping the bleeding rather than reigniting growth. A smaller-than-feared US decline was enough to lift the stock, showing how low expectations had fallen. Revenue still missed estimates, a reminder that leaning on value offers has not yet translated into top-line growth. Borden described “a soft consumer environment,” adding, “we’re doing well,” as McDonald’s holds or gains share in most large international markets.
What’s Next?
The key test is whether September’s return to growth holds through the fourth quarter, which management declined to promise. Investors will watch the results of the two value menu tests ahead of the national launch in early 2027, as well as the turnaround plan franchisees in France recently voted on. Any further weakening in low-income consumer spending would put pressure on traffic again.
Affected Tickers and Coins: MCD, XLY
Source: CNBC
