McDonald’s Q2 earnings: post-pandemic growth strategy expected to continue

​When is McDonald’s earning’s date?

McDonald's reports earnings on Wednesday 28 July.

McDonald’s earnings – what to expect

McDonald’s comes into this latest earnings season with the stock trading around record-highs, with having enjoyed a welcome recovery throughout 16-months since the March 2020 Covid-19 pandemic lows.

Despite the volatility and worries evident throughout the world in the face of ongoing Covid-19 restrictions, the fast food giant has remained on a strong footing thanks to its delivery and drive-through model.

That ability to outperform at a time when their competitors have struggled, does provide hope that the firm will have been able to gain market share and expand in the face of wider struggles.

McDonald’s are expected to report revenues of $5.6 billion, up 48% compared with quarter two (Q2) 2020. Meanwhile, earnings per share (EPS) are expected to rise 320% to $2.11.

With Q2 2020 marking the worst quarter of the pandemic, this report promises to deliver some impressive year-on-year (YoY) figures thanks to the base effects involved.

However, aside from those annual comparables, forecasts also point towards quarter-on-quarter (q/q) growth for sales, revenues, pre-tax profit, and EPS. Importantly, the notion that McDonald’s has taken advantage of their relative strength through the past year can be highlighted by expectations of a record number of franchised and company owned restaurants.

McDonald’s earnings – valuation and broker ratings

At 34 times earnings and with a yield of 2.20%, McDonald’s is evidently a mature stock that perhaps doesn’t offer the kind of value other less developed companies do. However, it is a trustworthy and stable name that has a proven track record that estimates signal should continue.

McDonald’s remains popular with brokers, with 29 ‘strong buy’ or ‘buy’ recommendations and nine ‘holds’, with no sell recommendations.

McDonald’s shares – technical analysis

The McDonald’s chart highlights what a solid performer this is, with each post-surge retracement period providing relatively shallow pullbacks to reflect the stability associated with the stock.

The latest period of consolidation has seen the stock trade within $224.70 and $237.86 for much of the past three-months. That range provides us with a key area which needs to be broken to bring a sign that we are going to move into a more directional phase.

Certainly the preference is for a bullish breakout given the uptrend in play. With that in mind, a break below $224.70 would signal a deeper retracement of the rally from $200.90 rather than a wider reversal signal for the stock.

A reliable performer looking to go from strength to strength

McDonald’s does remain a consistent performer despite the perceived shift towards healthy food options. While the pandemic hurt many in the sector, this report is expected to highlight how the fast food giant has taken advantage to further solidify its position at the top of the food chain.