McDonalds Q3 2023 earnings preview: what to expect amid interest rate and consumer spending concerns

When will McDonald's report its latest earnings?

McDonald's is scheduled to report its third-quarter (Q3) earnings before the market opens on Thursday, 30 October 2023.

The backdrop

McDonald's Corporation is a global fast-food restaurant chain operating in over 100 countries. As of the end of 2022, the company boasted more than 40,000 stores. Interestingly, more than half of the company's revenues are sourced from countries outside the US.

In Q2 of 2023, McDonald's financial performance surpassed analysts' expectations, driven by rebounding sales in China and increased US visits, thanks in part to their nostalgic mascot, Grimace.

"Frankly, the theme this quarter was Grimace," stated CEO Chris Kempczinski during the company's conference call.

A special Grimace Birthday meal combo, which featured a visually appealing purple milkshake, gained significant traction on social media, propelled by nostalgia for the classic McDonaldland character.

Key financial highlights for Q2 2023

• McDonald's reported a second-quarter net income of $2.31 billion
• Global comparable sales rose by 11.7% for the quarter, marking double-digit growth across each segment
• Earnings per share: adjusted $3.17 vs. an expected $2.79
• Revenue: $6.5 billion vs. an expected $6.27 billion.

What to expect?

Investors are increasingly concerned about various macroeconomic factors that could adversely affect McDonald's future earnings.

High on this list are rising interest rates, as well as the resumption of student loan repayments after a three-year hiatus. Both elements are likely to constrain consumer spending and footfall in McDonald's outlets.

"A challenging macroeconomic environment, including climbing interest rates and heightened costs, continues to disrupt consumer confidence and put downward pressure on consumer spending," McDonald's Chief Financial Officer Ian Borden noted in a late-July conference call with analysts, following the Q2 results.

This cautionary stance clarifies the rationale behind the softer financial outlook and the steep decline in McDonald's share price since July. However, it is widely believed that the fast-food chain is offsetting these headwinds through market share gains facilitated by enhanced service, competitive value offerings, and sales boosts from digital and delivery channels.

Key financials

Wall Street's expectations for upcoming results

• Earnings per share: adjusted $2.97 vs. $3.17 in Q2

• Revenue: $6.53 billion vs. $6.5 billion in Q2.

McDonald's revenue chart

McDonald's technical analysis

Since reaching a high of $299.35 in late July, McDonald's share price has plummeted nearly 18%, coinciding with the publication of the Q2 earnings report and a 120 basis-point rise in US 30-year yields.

Recent trading sessions indicate a rally from oversold levels, with the share price recovering to $245.73. Should the stock decline further post-earnings, significant support is expected at the $240 level, in line with the 200-week moving average.

McDonalds daily chart

Additional support is noted in the $230/$228 range, which aligns with lows seen in May and September of last year. Conversely, resistance is pegged at $280, anchored by the 200-day moving average and the November 2022 high of $281.67.

McDonalds weekly chart

• _{TradingView: the figures stated are as of October 23, 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}