McDonald's Q2 2024 earnings preview: value meals in focus
As McDonald's prepares to report its Q2 2024 earnings, analysts and investors focus on the potential impact of the extended $5 value meal promotion on revenue and stock performance amid inflationary pressures.
Since February, McDonald's stock price has faced steady declines. With Q2 earnings around the corner, can value meals drive a turnaround?
When will McDonald's report?
McDonald's fast-food giant's performance will be under scrutiny, especially as it plans to extend its $5 value meal promotion into August—a strategic move to counter inflationary pressures on consumer spending.
Expected earnings
- Revenue: analysts predict a slight increase to $6.63 billion from $6.5 billion in Q2 2024
- Net income: expected to decline to $2.24 billion from $2.31 billion last year.
Analyst insights
UBS analysts have maintained a "buy" rating but lowered their price target to $305 from $335. They anticipate inflation will pressure Q2 earnings but expect better performance in the year's second half as value promotions attract customers back.
Key performance metrics
- Comparable store sales: a crucial metric showing signs of slowdown. In Q2 2023, McDonald's reported 11.7% growth globally and over 10% in the US
- Strategic shifts: executives note inflation's impact, prompting a focus on value offerings.
Value meal strategy
In response to inflation's impact on sales, McDonald's and other chains have introduced lower-cost value meals. Early indications from the $5 value meal promotion, launched in late June, are positive. Nearly all locations have agreed to extend the promotion beyond its initial four-week schedule, potentially into August.
Analyst perspectives
Baird analysts are confident in McDonald's value-focused advertising, believing it will improve consumer perception and drive traffic back to stores.
"History suggests McDonald's can gain significant share when emphasising value-oriented price points with its substantial advertising budget," the Baird analysts noted.
Investor Focus and broker ratings
As McDonald's prepares to report its earnings, investors will watch for confirmation on the value meal promotion's future. They will also look for insights into how this strategy impacts overall sales and profitability amidst ongoing inflationary challenges.
McDonald's has a 'neutral' rating of 6 on the SmartScore available on the IG platform. Of the 27 analysts covering McDonald's, 19 recommend 'buy', 8 suggest 'hold', and none advise 'sell'.
SmartScore rating scale
Analyst rating
McDonald’s technical analysis
McDonald's long-term stock rally has recently faltered. After reaching highs at the year's start, the stock declined sharply, hitting its lowest since October 2022 in early July before recovering above the 50-day simple moving average (SMA). The stock has recorded a series of lower highs and lows since February. A sustained push above $264 could signal a trend change, while failure to hold post-earnings gains could see recent lows tested again.
McDonald's daily price chart
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